Second special survey among banks again yields little evidence of future credit crunch in Germany

At the turn of the year 2009-10, the Deutsche Bundesbank repeated the special survey – first conducted in July 2009 – in which selected German banks and banking associations were asked about their expected lending behaviour. The latest survey again provided little evidence of an imminent broad-based credit crunch in lending business with domestic enterprises. The banks’ responses therefore do not bear out concerns that the German economy could face a shortage of credit once the upturn gets underway.

Overall, the survey participants expect credit volume to remain largely stable in 2010. While their assessment of new lending is positive, they expect to be hit by high write-downs. On balance, the small banks surveyed expressed a somewhat more optimistic view of developments in terms of their credit volume than the large institutions.

Higher demand from enterprises is cited as the main factor driving future lending activity; this increase is also likely to be reflected in a rising utilisation rate on existing credit lines as well as a larger overall volume of loan applications. In response, the banks surveyed are planning to extend the credit lines granted while leaving the rejection rate unchanged.

When consulted for the July 2009 survey, the banks on average said they expected their tier 1 capital ratio to decline in 2010. The current special survey, meanwhile, revealed that the participating institutions anticipate no major change over the next twelve months. They believe that write-downs, poorer borrower creditworthiness and changes to the ratings of structured securities will hurt tier 1 capital ratios. However, this has to be weighed against improvements in tier 1 capital ratios as a result of balance sheet reductions, which the banks do not expect to affect their lending behaviour. The banks surveyed do not anticipate that government measures will provide them with any relief.

For a detailed description of the special survey and further results, see