DNBulletin
| Date | 28 January 2011 |
|---|---|
| Theme | Economy |
During the fourth quarter of 2010 a majority of banks in the Netherlands relaxed their standards for approval of loans to enterprises, for the first time since 2006. This is apparent from the latest Bank Lending Survey (BLS), a qualitative survey on lending policy held regularly among several banks in the Netherlands (See the Chart and the link to Table 5.5).
Banks reported a broad relaxation of credit standards during the fourth quarter of 2010 compared to the preceding quarter.This applied to both large and small enterprises and to both short-term and long-term loans.
The relaxation comes against the backdrop of sustained, if declining, moderately positive growth of corporate credit over the past few years. The same picture emerges from the latest data on the development of lending (see the link to the chart on corporate lending).
Underlying the recent relaxation of credit standards, banks reported, was the waning of restrictions necessitated by their capital and balance sheet positions. Increasing competition from fellow banks was also cited. Furthermore, a majority of banks reported an improved outlook for certain economic sectors and for – both larger and smaller – enterprises. Still, banks also emphasised a need to be safely covered against unexpected losses, and a majority continues to attach hefty collateral demands to loan approvals.
The relaxation of banks’ credit standards manifested itself in several specific credit conditions they imposed. For one thing, during the fourth quarter, more banks than before reported a lower margin on average risk loans. Another credit standard which banks reported to have adjusted slightly was the size of loans or credit lines. The earlier trend of consistent further tightening was reversed across the board in the fourth quarter, when banks reported no further tightening. Similar relaxations were implemented by a majority of banks regarding other lending conditions including maturity and on-charging of costs (not counting interest). Conversely, most banks left their margins on more risky corporate loans unchanged during the last quarter.
The overall relaxation does not imply that the tightening of previous years was completely undone. Corporate credit standards had been tightened ever further since the outbreak of the financial crisis in 2007. This made it less easy for enterprises to obtain credit on the same conditions as before the crisis. A majority of banks expects to relax their corporate credit standards further during the current quarter.