July Bank Lending Survey for Germany

According to the results of the latest Bank Lending Survey (BLS) for the second quarter of 2009, the surveyed institutions again tightened their credit standards in all business areas. In the reporting quarter, the surveyed German banks stated that they had tightened their credit standards only slightly on balance. This contrasted with the distinctly more restrictive changes in credit standards which they made in the three preceding survey rounds. By contrast, margins were expanded sharply in some cases. Most of the changes made in Germany were less marked than those in the euro area as a whole.

Specifically, the German banks taking part in the BLS tightened their standards in granting loans to enterprises only slightly on balance, while sharply expanding their margins for both average-risk and riskier loans. The quarterly decline in the degree of tightening of credit standards was the largest since the BLS was launched in 2003. These changes applied to both large firms and small and medium-sized enterprises as well as loans of all maturities. In this context, BLS participants were faced with a perceptible rise in demand, although this may have been distorted upwards by multiple loan requests at various banks.

According to the surveyed German managers, loans to households, too, were subject to more stringent standards in the quarter under review. Standards for lending to households were tightened slightly and the margins for consumer credit and average loans for house purchase were widened somewhat. There was, however, a marked widening of margins for riskier loans for house purchase. The participating institutions noted a marginal rise in households’ demand for loans.

For the third quarter of 2009, the BLS respondents expect a further slight tightening of their standards for loans to enterprises and to households.

The July survey again contained additional questions on the effects of the financial market crisis on the lending behaviour of the banks surveyed. According to the bank managers who were interviewed, problems in wholesale funding eased somewhat overall and did not affect credit standards as much as in the three preceding months. Responses to the question on the effects of the announcement and introduction of government measures to stabilise the financial system indicate that this led to a slight quarter-on-quarter improvement on average in the surveyed institutions’ market access to wholesale funding. However, limitations owing to capital restrictions and their negative impact on lending persisted in the past quarter. It was only in the case of a minority of banks that the introduction of the new Basel II capital adequacy framework had a restrictive impact on lending policy.

The aggregated survey results for Germany may be found at http://www.bundesbank.de/volkswirtschaft/vo_veroeffentlichungen.php.