Erkan Yönder

Erkan Yƶnder

PROFESSOR OF REAL ESTATE AND FINANCE

COVID-19 Impacts on Bank Stability in a Liquidity-Backed Environment

October 2020, Working Paper, with Sati Mehmet Ozsoy, Mehdi Rasteh, and Meric Yucel

The Great Recession has been more of a bank governance issue. In the COVID-19 crisis, liquidity needs of firms have been the immediate problem due to lockdowns, and banks have responded to these with the support of government and central bank programs. Our paper is the first evaluating the impact of the geographic exposure to COVID-19 on bank stability and performance in such a liquidity-backed environment. We find that bank stability and performance worsen by COVID-19 exposure. The liquidity injections seem to be only helpful for banks with higher equity capital capacity that were able to increase loan supply. We also find that banks operating in locations with high-dense black population suffer from COVID-19 exposure while their peers do not which might potentially hint at differences in the accessibility to credit expansion.

Understanding Drought Shocks: Bank Financial Stability and Loan Performance

August 2020, Working Paper, with Sati Mehmet Ozsoy and Mehdi Rasteh

Recently, regulators and financial institutions have been discussing the development of stress tests to understand the impact of climate on banks. We define a two-year drought shock at bank level using the coordinates of bank branches and test the impact of drought shocks on bank stability and loan performance. Applying a difference-in-differences strategy, we find that drought shocks significantly worsen Z-Score, ROA volatility, loan performance, and equity volatility of affected banks compared to unaffected banks. Our findings are robust to placebo shocks. We also document that affected banks are more likely to close branches in affected regions.