Bank lending conditions have not been so strict since 2011

Financial•May 2 ’23 5:07 PMauthors: Jorn Lucas and Remy Cook

It is becoming increasingly difficult for businesses and families to borrow money. As a result of the interest rate policy of the European Central Bank, more and more European banks are tightening their lending conditions. A quarterly report from the European Central Bank shows that conditions haven’t been so stringent since 2011, at the time of the euro crisis.

the European Central Bank lending survey It is a quarterly report based on a survey of 158 banks conducted at the end of March and beginning of April. Banks in the eurozone point out that interest rate increases are passed on to their customers. At the same time, the terms of lending are shrinking and the demand for loans is also falling.

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The European Central Bank is expected to raise interest rates again later this week. The general level of interest rates is the main reason for the decline in the demand for loans a report. The drop in credit applications by companies in the first quarter was larger than banks expected. Households are also less likely to apply for a mortgage.

Not a good sign

And that’s not a good sign, says Han de Jong, a home economist at BNR. He argues that things that affect credit and the economy also affect goods and services, and that tightening credit conditions usually heralds a slowdown in economic growth. “Especially if the demand for credit from businesses – as banks have seen – also declines,” says De Jong. “That’s not a good sign either.”

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According to De Jong, the problem lies in companies no longer applying for loans because they do not have confidence in the future and in the fact that companies are no longer applying for loans due to high interest rates. Bad news for the banks themselves. “I myself have been thinking for a while that we are heading into a recession, and these numbers don’t change my mind,” says de Jong. In fact – they confirmed my opinion a bit. And we know that in a recession, businesses will go bankrupt and banks will suffer credit losses. So this is not good news for banks.

Banks are less willing to take risks. In addition, the financing of the banks themselves is more expensive. According to the European Central Bank, customers withdrew 146 billion euros from their accounts in the first quarter of this year.

A report from the European Central Bank shows that conditions have not been so stringent since 2011, at the time of the euro crisis. (ANP/AFP)

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Despite the recent turmoil in the banking world with the collapse of Silicon Valley Bank in the US and Credit Suisse in Switzerland, Dutch confidence in financial institutions has proven stable. Just over half in a survey by De Nederlandsche Bank (DNB) say they trust these institutions a lot or very much. The rest have less or no confidence at all.

This time, the annual DNB survey coincided with the turmoil in the banking sector in March. More than 2,200 households were surveyed. Three-quarters of them were confident that their bank would be able to repay the money entrusted to them at all times. For all Dutch banks, this percentage is 68 percent, just like for insurance companies. 62% trust pension funds.

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