Bank survey yields little evidence of imminent credit crunch in Germany

A special survey conducted by the Bundesbank among selected banks and banking associations in July provided little evidence that a broad-based credit crunch is imminent in the corporate lending business. The information submitted by the banks failed to confirm frequently voiced concerns of growing difficulties in the adequate supply of German industry with credit.

Overall, survey participants expect no decline in new lending in the second half of 2009 or in 2010. Specifically, larger institutions anticipate muted growth in their lending business, while smaller banks even expect to see gains.

Among the factors that are expected to determine developments in lending, two stand out: cyclical factors affecting the supply of loans, such as the general perception of risk, and a drop in demand for financing for fixed investment.

Banks’ capital position is not expected to exert a dampening influence. However, the large institutions did state that the introduction of the Basel II regulations on minimum capital requirements for banks had resulted in slightly more procyclical lending behaviour.

Some of the information provided by the banks points to potential risk factors for future lending. This is likely to affect mainly large enterprises and less the small and medium-sized enterprises which make up Germany’s broad Mittelstand. The larger banks in particular – the typical partners of large enterprises – expect drawdowns on existing credit lines to rise. As these banks also say that they are unlikely to significantly expand their lending to domestic enterprises in the next one and a half years, this is – taken in isolation – synonymous with a lower supply of other loans, for example longer-term ones.

For a detailed description of the special survey and further results, see