January results of the Bank Lending Survey in Germany
German credit institutions eased their lending policies in all three surveyed lines of business in the final quarter of 2014. This is shown by the latest round of the Bank Lending Survey. While credit standards on loans to non-financial corporations remained unchanged in net terms, banks narrowed margins on average-risk loans considerably and on riskier loans markedly. In a departure from the preceding two quarters, these narrowed margins benefited small and medium-sized enterprises in addition to large enterprises. As well as narrowing margins, the institutions also eased the other surveyed credit conditions (collateral requirements, loan covenants and non-interest rate charges are among those covered). Ultimately, credit standards on loans to households for house purchase remained unchanged. On balance, respondents reduced only the margins on average-risk and riskier exposures in this line of business slightly. Notwithstanding the unchanged credit standards on loans to enterprises and loans to households for house purchase, credit standards on consumer credit were relaxed to a moderate extent. Furthermore, banks ultimately narrowed the margins on riskier loans in this line of business while making no significant adjustments to margins on average-risk loans. With respect to the other surveyed conditions, only loan collateral requirements were eased on balance.
Demand for loans to enterprises and loans to households for house purchase and consumer credit rose significantly overall in the final quarter of 2014. Nevertheless, as was already the case in the preceding quarter, demand for loans to enterprises differed across surveyed enterprise sizes and maturities. For example, demand from large enterprises and for long-term loans rose considerably, whereas demand from small and medium-sized enterprises and for short-term loans remained virtually unchanged.
The January survey round contained ad hoc questions on the banks' funding conditions, the impact of the new regulatory and supervisory activities and the banks' participation in the TARGETed longer-term refinancing operations (TLTROs) from 2014 to 2016. In view of the current situation on the financial markets, German banks again reported that their funding situation had improved somewhat compared with the preceding quarter. For the first time, the banks did not reduce their risk-weighted assets further in the second half of 2014 in response to the new regulatory and supervisory activities; nonetheless, they continued to scale back their riskier loans and strengthened their capital position. The TLTRO in December 2014 was met with moderate interest by the surveyed German institutions. Those banks which did participate cited the attractive TLTRO conditions as the reason behind this. They wish to use the funds received chiefly for lending. The banks anticipate that taking part will improve their financial situation somewhat, but do not expect any effects on their credit standards.
The aggregate results of the Bank Lending Survey for the euro area as a whole show that banks have slightly eased their credit standards on loans to enterprises and, to a lesser extent, on loans to households for house purchase and consumer credit. The demand for loans to enterprises in the euro area rose markedly in the final quarter of 2014, picking up at a rate not seen since the start of 2011. Growth in households' borrowing displayed similar momentum to the preceding quarter. While demand for loans to households for house purchase was up considerably in this segment, the increase in demand for consumer credit was somewhat lower by comparison.
According to banks in the euro area, the funding situation continued to improve. In the wake of the new regulatory and supervisory activities, banks reduced their risk-weighted assets slightly further in the latter half of 2014 and strengthened their capital position. As was the case with the first TLTRO in September 2014, the second TLTRO in December 2014 met with considerably greater interest in the euro area than it did in Germany. According to the information submitted by respondents, participating banks in the euro area wish to primarily use the funds obtained for lending to enterprises.