April results of the Bank Lending Survey (BLS) in Germany

  • Easing of credit standards in all three loan categories surveyed.

  • As in previous survey rounds, overall credit terms and conditions eased markedly for loans to enterprises and loans to households for house purchase, especially by narrowing margins irrespective of borrowers’ creditworthiness. At the same time, a narrowing of margins was reported for consumer credit as well.

  • Rising demand for loans in all loan categories surveyed.

  • Relative to the midpoint since 2010, current credit standards are somewhat looser for loans to enterprises but considerably tighter for loans to households for house purchase.

The survey covers three loan categories: loans to enterprises, loans to households for house purchase, and consumer credit and other loans to households. Credit standards (ie banks’ internal guidelines or loan approval criteria) for loans to enterprises were eased marginally in the first quarter of 2018, in line with expectations in the previous survey round. For the third time in succession, credit standards for loans to households for house purchase were eased slightly, bucking earlier expectations that no adjustment would be made. Credit standards for consumer credit and other loans to households were eased moderately on balance, above and beyond the extent expected in the previous quarter.

In addition to credit standards, banks also eased their overall terms and conditions (ie the actual terms and conditions agreed in the loan contracts) in all three surveyed loan categories. This was achieved mainly through margins, which were narrowed irrespective of borrowers’ creditworthiness. Banks once again cited high competitive pressure as the main reason for narrowing margins.

Demand for loans increased in all three loan categories. Demand from households for loans for house purchase, in particular, returned to more dynamic growth than in previous quarters.

The April survey contained ad hoc questions on banks' financing conditions, the levels of credit standards, the impact of the Eurosystem's expanded asset purchase programme (EAPP), and the consequences for credit business of the negative interest rate on the Eurosystem's deposit facility. The German banks reported that, given the situation in the financial markets, their funding situation showed very little change compared with the preceding quarter. Credit standards for loans to enterprises are currently somewhat lower than their reference value relative to the midpoint of the range set by the credit standards implemented since the second quarter of 2010. The standards for loans to households for house purchase are considerably tighter, while standards for consumer loans are at the same level as the reference value. According to respondents, the Eurosystem’s expanded asset purchase programme continued to improve banks’ liquidity position and funding conditions. On the other hand, the programme continued to place a strain on credit institutions’ profitability. The negative interest rate on the deposit facility contributed considerably to a decline in banks’ net interest income and, moreover, led to falling lending rates and shrinking margins. At the same time, the negative interest rate on the deposit facility, viewed in isolation, led to a slight increase in the volume of loans to households yet had no impact on loans to enterprises.

As part of a euro area-wide harmonisation of the aggregation methods used in the BLS, the aggregated time series were recalculated in the April survey round (retroactively going back to January 2003).