Corporate credit in Russia during COVID-19 pandemic: the role of credit lines

Burova A., Kozlovtceva I., Sinyakov A.

We study corporate loan composition in Russia during the pandemic along two dimensions.
First, using probability of default to measure borrower quality, we find that the share of loans provided by banks to firms with weaker fundamentals increased during the pandemic. This observation indicates increasing exposure of banks to credit risk. Additionally, this change is unrelated to pandemic effects and reveal changes in behavior of creditors and borrowers.  Second, we find that credit line utilization increased during the pandemic irrespective of firms' ex ante probabilities of default. Thus, credit lines played the role of an automatic stabiliser during the period of high demand for liquidity. We also find that financially weaker banks tended to have higher shares of credit line utilisation before and during the pandemic, and this may have implications for the banks' stability.

Corporate credit in Russia during COVID-19 pandemic: the role of credit lines