October results of the Bank Lending Survey (BLS) in Germany

23.10.2018 | Deutsche Bundesbank DE

  • Banks again eased their credit standards for loans to enterprises and loans to households for house purchase. For consumer credit and other lending to households, meanwhile, banks made virtually no adjustments.
  • Enterprises’ demand for loans rose moderately. Households’ demand for loans for house purchase rose marginally, while it rose slightly for consumer credit and other lending. Overall, growth in demand for loans weakened as compared to the preceding survey of July 2018, a development which was particularly pronounced in relation to households. 
  • All other things being equal, the Eurosystem’s expanded asset purchase programme (EAPP) improved the financing conditions of the credit institutions surveyed, while continuing to weigh on profitability, albeit to a lesser degree than in previous surveys. At the same time, banks said they regarded the programme’s effect on lending policy and lending volumes as minor.

The survey covers three loan categories: loans to enterprises, loans to households for house purchase, and consumer credit and other loans to households. The surveyed banks eased their credit standards (i.e. banks’ internal guidelines or loan approval criteria) for loans to enterprises marginally on balance in the third quarter of 2018, after having planned a marginally tightening in the July 2018 survey. Similarly, standards for loans to households for house purchase were also decreased marginally, though slightly less so than expected in the preceding quarter. In the four previous quarters, requirements in this loan segment had been eased somewhat. On balance, credit institutions marginally tightened their standards for consumer credit and other loans to households, after having planned a marginal easing for the third quarter in the previous quarter.

Alongside the overall small easing in credit standards, terms and conditions were again perceptibly adjusted both for loans to enterprises and loans to households for house purchase. This took the shape, in particular, of lower margins for average-risk exposures. As in the past, the banks again explained that they had eased their lending policies mainly in response to the intense competition.

The extremely lively growth in demand for loans seen in the previous quarter did not continue in the third quarter of 2018 – something which banks had largely anticipated in the preceding quarter. Following the clear rise in demand for loans to enterprises and loans to households for house purchase in the previous quarter, the funds required in corporate business grew only moderately in the third quarter and marginally in terms of loans for house purchase. Looking at consumer credit and other lending to households, banks reported a slight net increase in demand for funds, following strong growth in the preceding quarter. For enterprises, the slowing momentum in demand can be explained, in particular, by stronger recourse to internal financing. Households’ demand for loans, meanwhile, was impacted by a reduced propensity to purchase durable consumer goods and the diminished importance of the low general interest rate level as well as a slight deterioration in the assessment of the prospects for the residential property market.

The October survey contained additional questions on participating banks' funding conditions, the impact of the Eurosystem's expanded asset purchase programme (EAPP) and the consequences for credit business of the negative interest rate on the Eurosystem’s deposit facility. The banks reported that, given the situation in the financial markets, their funding situation had not changed much compared with the preceding quarter. The banks reported that the Eurosystem’s expanded asset purchase programme was again improving their funding conditions. However, the programme also continued to squeeze banks’ profitability. This effect was, however, perceptibly weaker than in the previous surveys. Unlike in previous survey rounds, the surveyed banks no longer reported that the programme had made any noteworthy net contribution to improving their liquidity position. In terms of the impact on lending policies, the surveyed banks on balance stated that the programme had, in the past six months, influenced neither credit standards nor terms and conditions in any of the credit segments asked about. Similarly, the banks reported no noteworthy impact on lending volumes. The negative interest rate on the deposit facility was again a key factor in banks’ shrinking net interest income over the past six months. At the same time, its impact, all other things being equal, was to slightly increase the volume of loans to enterprises and households.

The Bank Lending Survey, which is conducted four times a year, took place between 14 September and 1 October 2018. In Germany, 34 banks took part in the survey. The response rate was 100%.