Third special survey among banks gives no indication of future credit crunch in Germany
In July 2010 the Deutsche Bundesbank conducted its third special survey among selected German banks and banking associations. The current survey provided no indications of an imminent credit crunch in business with domestic non-financial corporations over the next 12 months. Fears of the German economy being undersupplied with liquidity when the upswing gathers steam are therefore not shared by the banks.
Overall, survey participants expect the volume of lending to rise over the next 12 months, mainly on account of loans to small and medium-sized enterprises. An optimistic assessment of new lending is accompanied by the expectation of high repayments on existing loans, especially by large enterprises. In contrast to past survey rounds, write-downs on the loan portfolio do not seem to have affected the volume of lending over the forecasting horizon.
With regard to the determinants of the forecast lending volume, an improvement in the outlook for general economic activity and rising demand are cited as positive factors. This assessment is also demonstrated by the expectation of increasing drawdowns on existing credit lines and by a larger overall volume of credit applications. In response, the surveyed banks are planning to expand the credit lines granted while leaving the rejection ratio unchanged.
While the previous survey in January 2010 showed that banks had still been expecting the tier 1 capital ratio to decline in a number of cases, they now anticipate a constant ratio on average over the next 12 months. Some, mainly smaller institutions even expect their tier 1 capital ratio to increase slightly.
As institutions see it, the chief factors weighing on capital are likely to be changes in the ratings of structured securities and poorer borrower creditworthiness. The surveyed institutions hope that planned balance sheet reductions and profit retention will improve their capital position, however. The participating banks do not expect government measures to provide any relief.
For a detailed description of the special survey and further results, see http://www.bundesbank.de/volkswirtschaft/vo_veroeffentlichungen.en.php.