Stress Testing Banks' Digital Capabilities: Evidence From the COVID-19 Pandemic

Amid mobility restrictions, banks with better IT experience larger reductions in physical branch visits and larger increases in website traffic, implying a larger shift to digital banking. Stronger-IT banks are able to originate more PPP loans to small business borrowers, especially in areas with more severe COVID-19 outbreaks, higher internet use, and higher bank competition. Those banks also attract more deposit flows. Our findings are robust to using instrumental variables that capture exogenous variation in bank IT.