German banks’ lending in the third quarter of 2012 was characterised by restrictive adjustments, according to the Bundesbank’s latest survey findings. On balance, institutions slightly tightened their credit standards in lending to enterprises and also set more restrictive lending conditions compared with the previous quarter, which affected margins in particular. At the same time, loans to households for house purchase also saw a perceptible tightening of standards.  According to the banks, this was due to funding costs and accounting restrictions as well as stricter standards for the minimum level of repayment rates. Consumer credit, however, was hardly affected by restrictive adjustments, with only the margins being increased.

In terms of the demand for loans, banks noted diverging developments across their lines of business: whereas institutions reported, on balance, a slight decline in financing needs in the case of loans to enterprises, they also reported a distinct increase in demand with regard to private building projects and a slight increase in liquidity needs for funding household consumption.

The October survey round contained two ad hoc questions about the impact of the financial and sovereign debt crisis on banks’ wholesale funding conditions and credit standards. Institutions reported an overall improvement in their wholesale funding environment in the third quarter of 2012. It was, above all, developments in access to short-term deposits and to the primary markets for medium to long-term debt securities which banks assessed more favourably than in the previous quarter. At the same time, banks stated that their exposure to government bonds had not influenced either their wholesale funding conditions or how they had set their credit standards over the past three months.

In the euro area, banks also made their credit standards more restrictive; cases of tightening were even more marked than in Germany, especially in loans to enterprises. The gloomier economic outlook, along with sector-specific and firm-specific factors, were cited by the institutions as the main reasons for this. There was again a distinct fall in demand for loans in all surveyed business lines. At the European level, too, banks reported an overall improvement in access to the wholesale funding markets. However, their exposure to government bonds, in and of itself, exerted a negative impact on funding conditions, although such effects were very limited. In line with this, banks saw their tightening of credit standards as being due only in small part to their portfolios of government bonds.

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