January results of the Bank Lending Survey in Germany
On the whole, German banks made only minor adjustments to their credit standards in the fourth quarter of 2016, as is revealed by the latest Bank Lending Survey (BLS) conducted among banks domiciled in Germany.
Credit standards for loans to enterprises and for loans to households for house purchase remained constant overall. It was only in their granting of consumer credit that banks were slightly expansionary. Their adjustment of credit margins was also limited. Institutions reduced their margins in lending to enterprises only slightly on balance, irrespective of borrowers' creditworthiness. Margins for consumer credit and average-risk loans for house purchase remained stable. Margins were expanded moderately in the case of higher-risk loans for house purchase.
Demand for loans increased, according to the information provided by German banks. Enterprises' demand for funds rose markedly, with consumer credit and loans to households for house purchase both seeing a marginal increase, although the participating institutions had still perceived demand for housing loans to be declining on balance in the preceding quarter.
The January survey round contained ad hoc questions on the banks' funding conditions, the impact of the new regulatory and supervisory activities (including the capital adequacy requirements defined in CRR/CRD IV and the requirements resulting from the ECB’s comprehensive assessment) and the banks' participation in the targeted longer-term refinancing operations (TLTRO and TLTRO II). The German banks reported that, given the situation in the financial markets, their funding situation showed little change compared with the preceding quarter. Regarding the new regulatory and supervisory activities, the second half of 2016 saw the banks making a further reduction in their risk-weighted assets on balance and strengthening their capital position again. The TLTRO II in December 2016 was met with moderate interest by the surveyed institutions. They cited the attractive TLTRO conditions as their reason for participating. They stated that the borrowed funds were to be used chiefly for lending, in keeping with the objective of the monetary policy measure. Overall, the participating banks’ financial situation has shown a slight improvement, but institutions are expecting only minimal impact on their credit standards.
In the euro area as a whole, the surveyed institutions left their standards largely unchanged in the case of both loans to enterprises and for loans to households.
Demand for loans to households for house purchase increased substantially in the euro area. There was noticeable growth in banks' corporate and consumer lending.
According to banks in the euro area, there was barely any change overall in the funding situation. In the wake of the new regulatory and supervisory activities, banks continued to strengthen their capital position in the second half of 2016. As was the case with the previous operations, the TLTRO II of December 2016 met with greater interest among the surveyed BLS banks in the euro area than it did among the German institutions.