The Effects of the Covid-19 Pandemic on the Banking Market: a study to the state of Sao Paulo
This study analyzes the banking market of the state of São Paulo during the Covid-19 pandemic, starting in March 2020. Both total credit and deposits rose sharply at the beginning of the pandemic crisis, stabilizing in the second semester of 2020. This behavior was not verified in subsequent waves of the virus. Regressions provide evidence for more restrictive lending practices by larger banks. Less capitalized banks lent less than expected during the early phases of the pandemic, but in moments of higher mortality, the effect of this variable is positive. Public banks, despite losing market share during the period, may have taken a role in unlocking credit from april to june 2020, effect which is reversed in later periods. For deposits, public banks had a negative impact during the whole pandemic period, while capitalization affected positively, providing some support to the search-for-safety hypothesis. Aggregate data also indicate that precautionary and forced savings hypotheses may also help to explain the behavior of deposits in São Paulo.