July Bank Lending Survey for Germany

The credit standards for lending to non-financial corporations in Germany have remained largely unchanged in the second quarter of 2012, according to the Bundesbank’s latest survey findings. A deterioration in sector-specific and firm-specific factors, along with higher costs of capital, counterbalanced banks’ ample liquidity. Credit conditions were, however, more restrictive than in the previous quarter, especially with regard to margins. At the same time, there was a fall in demand for loans to enterprises among the banks participating in the survey.

In addition, the banks tightened their credit standards for private loans for house purchase somewhat, but not for consumer loans. Moreover, in both lines of business, the credit conditions were adjusted only marginally. At the same time, the surveyed banks noted a sharp rise in demand for private loans for house purchase. This increase was driven once again by the positive outlook in the housing market, low interest rates and robust consumer confidence. Demand for consumer loans, however, remained unchanged from the preceding quarter.

The July survey round contained several ad hoc questions on banks’ funding conditions, the impact of the stricter capital regime, and the sovereign debt crisis. German banks reported a perceptible deterioration in their long-term retail funding, whereas access to all other sources of funding changed relatively little on the whole. By contrast, the European Banking Authority’s provisions for large, international banks and the institutions’ preparations for the stricter Basel III capital regime had a considerable impact on banks’ business policy. This led banks to take a number of measures, including a perceptible reduction in their risk-weighted assets and an increase in their equity capital, particularly by retaining profits. By contrast, the sovereign debt crisis continued to have virtually no impact on German banks’ funding situation or credit standards.

Credit standards in the euro area, on the other hand, were again tightened slightly. This was due not only to restrictive bank-related factors but also a deterioration in the institutions’ perception of risk. At the same time, there was a further decline in demand in all surveyed business lines. As was to be expected, the sovereign debt crisis had a much stronger impact on the wholesale funding conditions of the banks in the Europe-wide sample. Respondents reported somewhat more difficult funding conditions across all surveyed markets and sources. Likewise more significant than in the German subsample was the impact of the stricter capital regime on risk-weighted assets, which were reduced sharply.

The aggregate survey results for Germany may be found at the following link: