January results of the Bank Lending Survey in Germany
- German banks made hardly any changes to their lending policies in the final quarter of 2018. Credit standards remained virtually constant in all three loan categories. At the same time, banks’ overall credit terms and conditions for loans to enterprises and for loans to households for house purchase were eased slightly.
- Following rather subdued developments in the previous quarter, demand for loans in all the loan categories surveyed picked up momentum again. Demand for loans to enterprises rose considerably, exceeding expectations in the preceding quarter. Demand for loans to households saw a moderate increase.
- With regard to the impact of the new regulatory and supervisory activities, the surveyed banks strengthened their capital position moderately on balance in the second half of 2018.
The survey covers three loan categories: loans to enterprises, loans to households for house purchase, and consumer credit and other lending to households. The surveyed banks eased their credit standards (i.e. banks’ internal guidelines or loan approval criteria) for loans to enterprises only marginally on balance in the fourth quarter of 2018, and thus slightly less than expectations reported in the October 2018 survey. During the reporting period, credit standards for loans to households for house purchase were not adjusted for the first time following a prolonged spell of easing, which is in keeping with expectations reported in the preceding quarter. As expected, the surveyed banks did not change their loan approval criteria for consumer credit and other lending either.
Banks further eased their overall terms and conditions (i.e. the actual terms and conditions agreed in the loan contracts) for loans to enterprises and for loans to households for house purchase on balance. Yet again, they did so by narrowing their margins irrespective of borrowers’ creditworthiness on loans to households for house purchase and, in the case of loans to enterprises, by narrowing their margins for average risky loans. As in the past, the banks primarily put these adjustments down to the intense competition. By contrast, banks’ overall terms and conditions for consumer credit and other lending remained unchanged.
Demand for loans in all loan categories surveyed was brisk again in the fourth quarter of 2018 following rather subdued developments in the previous quarter. The financing needs of enterprises picked up considerably again, exceeding expectations reported in the preceding quarter. Demand for loans to households rose markedly in the case of both loans for house purchase and consumer credit and other lending. This was largely in line with expectations reported by banks in the previous quarter. The main drivers of the accelerating momentum in demand were the rise in enterprises' financing needs for fixed investment, the low general level of interest rates, the housing market prospects, including expected house price developments as well as households’ high propensity to acquire durable consumer goods.
The January BLS 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), as well as, once again, on the impact of non-performing loans (NPLs) on banks’ lending policy.
The German banks reported that, given the situation in the financial markets, their funding situation had hardly changed compared with the preceding quarter. In response to the new regulatory and supervisory activities, the surveyed banks strengthened their capital position moderately overall in the second half of 2018 and increased somewhat their risk-weighted assets on balance. During the same period, as in the previous survey in July 2018, the NPL ratio (percentage ratio of the stock of gross NPLs on the bank balance sheet to the gross book value of loans) had no impact on adjustments to the surveyed banks’ credit standards and credit terms and conditions. Nor do banks expect any noteworthy effects over the coming six months.
The Bank Lending Survey, which is conducted four times a year, took place between 7 December and 28 December 2018. In Germany, 34 banks took part in the survey. The response rate was 100%.