Covid-19 And Retail Depositor Strategies In Russian Regions: Whether To Withdraw And Why

2023. No. WP BRP 92/FE/2023.

Popova P., Semenova M., Sokolov V.

The COVID-19 pandemic caused a significant change in the consumption, savings, and employment patterns of individuals. This study investigates the reaction of individual bank depositors to the spread of COVID-19 from the perspective of the outflow of retail deposits and the shift in their maturity structure across Russian regions which were differently hit by the pandemic. Exploiting the cross-regional variation in COVID-19 cases in Russia from April 2020 to September 2021, we document higher deposit outflows and a shift to short-term deposits in banks that were operating in the regions with higher rates of COVID-19 relative to banks from the regions that were less affected by the pandemic. We demonstrate that these effects are driven by increased unemployment, the lack of state-financed beds in hospitals, and the lack of financial literacy. Stricter isolation measures and underdeveloped bank branch networks smoothed the withdrawals of banks deposits caused by increased number of new COVID-19 cases. The maturity shifts are additionally driven by lower regional income and increased household health expenditures. Our results do not support the alternative hypothesis that those changes were forced by market discipline mechanisms.

Keywords: банки, banks, вклады физических лиц, регионы России, retail deposits, Russian regions, COVID-19, COVID-19

Publication based on the results of: Regional Economic and Financial Development Diversity: Institutional Analysis of Variation Determinants, External Shocks Impact, and Regulatory Policies’ Efficiency (2023)