July results of the Bank Lending Survey in Germany
According to the latest Bank Lending Survey, the credit standards of German institutions for lending to non-financial corporations were unchanged in the second quarter of 2014. By contrast, the surveyed institutions narrowed their margins for loans to enterprises. However, this only benefited large enterprises, with margins for loans to small and medium-sized enterprises remaining unchanged. The standards for loans to households were likewise subject only to marginal changes. They remained unchanged for loans to households for house purchase and were eased somewhat for consumer loans. The margins for average-risk loans to households were narrowed, while margins for riskier loans remained very largely at their level in the previous quarter. For the third quarter of 2014, the surveyed banks are planning a slight easing of standards for loans to enterprises, with no significant changes under consideration for loans to households.
On balance, enterprises' demand for credit remained virtually unchanged on the quarter, with demand from large enterprises decreasing somewhat and demand from small and medium-sized enterprises showing some increase. Banks reported higher demand for loans from households, although this rise in demand was less dynamic than in the previous quarter.
The July survey contained a number of ad hoc questions on banks' funding conditions, the impact of the sovereign debt crisis and on how the institutions’ lending policy is affected by the new regulatory and supervisory activities, which include the balance sheet assessment by the ECB. The financial institutions reported a slight improvement in their funding environment in comparison to the previous quarter. They also stated that the sovereign debt crisis had no more than minor effects on their funding conditions and no effects whatsoever on their lending policy during the reporting quarter. In the wake of the new regulatory and supervisory activities, the banks reduced their risk-weighted assets in the first half of 2014, albeit to a lesser extent than in the second half of 2013. In addition, they strengthened their capital position by retaining profits and issuing capital instruments. In lending business, the changed regulatory and supervisory setting made itself felt merely in the form of slightly tighter credit standards for enterprises.
The aggregate results of the Bank Lending Survey for the euro area as a whole show that banks in the euro area made scarcely any changes on balance to their credit standards for loans to enterprises or to households. Enterprises’ demand for credit also remained virtually unchanged, while demand from households picked up more strongly than at any time since the end of 2010.
According to banks in the euro area, the funding situation continued to improve. Taken in isolation, developments on the European sovereign bond markets had the effect of slightly easing the funding situation and had scarcely any impact on lending policy in the reporting quarter. In the wake of the new regulatory and supervisory activities, the reduction of risk-weighted assets by euro-area banks stalled in the first half of 2014, while the strengthening of their capital position continued.