Do Banks Lend Less in Uncertain Times?

We study the development of bank lending in the USA after four large jumps in uncertainty using an event study approach. We find that more liquid banks slow down and lend less after a surge in uncertainty. Lending by smaller banks is also less responsive to increases in uncertainty, which points to an increased importance of bank-customer relationships. For capitalization, we find mixed evidence. These heterogeneities across banks suggest that declines in bank lending following increases in uncertainty result at least partly from a reduced supply of bank loans.