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Journal Article
Risk of Business Insolvency during Coronavirus Crisis
Many businesses had amassed high levels of debt, or leverage, before the COVID-19 pandemic. Out of precaution or necessity, firms increased their borrowing further after the onset. Although the shock to those firms’ value significantly increased their risk, measured by their distance-to-default, the default risk remains relatively small for most corporate debt. Nevertheless, the amount of outstanding liabilities among firms with elevated risk of insolvency is more than two times higher than at the peak of the global financial crisis.
Journal Article
Minority Banks during the COVID-19 Pandemic
The COVID-19 pandemic disproportionately affected the health and financial well-being of communities of color. Over the past year, minority banks that specialize in providing financial services to underserved communities and minority borrowers have also performed significantly worse than other banks of similar size. Minority banks projected higher loan losses and had lower profits than nonminority banks. To the extent that underperforming minority banks may be more reluctant to expand lending—whether to avoid risk or minimize regulatory scrutiny—it could further exacerbate the unevenness ...