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The impact of the COVID-19 pandemic on bank funding costs

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  • Tran, Dung Viet
  • Nguyen, Thanh Cong
  • Hoang, Huy Viet

Abstract

This study examines how the COVID-19 pandemic influences bank funding costs using a sample of around 5300 US listed banks from 2018:Q3 to 2021:Q2. We consistently find that the COVID-19 pandemic significantly reduces bank funding costs. Digging deeper into bank funding structure, our findings show that the decline in bank funding costs is mainly driven by the increase in the supply of retail deposits rather than wholesale deposits. We also find that large banks with higher asset quality benefit more from the pandemic than small and medium-size banks in terms of cheaper funding costs during the pandemic.

Suggested Citation

  • Tran, Dung Viet & Nguyen, Thanh Cong & Hoang, Huy Viet, 2024. "The impact of the COVID-19 pandemic on bank funding costs," Finance Research Letters, Elsevier, vol. 67(PB).
    • Handle: RePEc:eee:finlet:v:67:y:2024:i:pb:s1544612324009735
    DOI: 10.1016/j.frl.2024.105943
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    References listed on IDEAS

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    More about this item

    Keywords

    Bank funding costs; COVID-19 pandemic; Insured deposit costs; Uncertainty; Uninsured deposit costs;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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