Banks expect continued decline in credit demand

Statistical News Release
Date 27 April 2012

Dutch banks expect to see a continued drop in credit demand during the second quarter of 2012, especially with respect to home mortgages and corporate credit (Chart 1, click to enlarge).This is apparent from the ECB’s latest quarterly Bank Lending Survey.About one-third of Dutch banks participating in the ECB lending survey foresees falling credit demand, while the others report no real expected changes.Dutch banks’ outlook for the second quarter of 2012 follows a decrease in lending during the first quarter.

Chart 1 Net percentage of Dutch banks reporting a change in demand for home mortgages and corporate credit compared to the previous quarter
Moreover, a majority of banks estimate no further tightening of credit standards on loans extended in the second quarter of 2012; only very few banks expect to tighten standards.

Corporate credit

Very few Dutch banks reported a minor tightening of credit acceptance standards for loans to enterprises during the first quarter of 2012.Such slight tightenings have been reported for three quarters running (Chart 2, click to enlarge).This time, they concerned long-term loans to small and medium-sized enterprises (SME).Regarding loans to large corporations and short-term loans, average acceptance standards remained unchanged.

A minority of banks reported that perceived risk regarding the outlook for the industry or corporation they exented loans to had increased during the first quarter.This also applies to their perception of risks inherent in the collateral provided for the loans.
The overall picture of a slight tendency towards tightening also emerges from the actual credit standards applied to corporate loans by banks.Several banks increased marging on more risky loans, while no margin adjustment was reported for less risky exposures.A significant number of banks reported tightening of the conditions regarding the size and maturity of loans or credit lines.

In the first quarter, banks observed a decrease in the total demand for corporate credit.The decline was reported across the board, yet was most pronounced as regards the SME sector and in long-term lending.The causes of the decline in demand, as reported by banks, was the decreased funding need for fixed investments and for inventories and operating capital.The predicted decline in demand during the second quarter of 2012 will, according to the banks, come from both large and small businesses.

Chart 1 Net percentage of Dutch banks reporting a change in demand for home mortgages and corporate credit compared to the previous quarter
Residential mortgage loans

Some Dutch banks (33%) reported a tightening of credit standards for residential mortgage loans during the first quarter of 2012, whereas a majority reported unchanged standards.This outcome followed a quarter of unchanged mortgage lending standards (Chart 2).

Among the most frequently reported reasons for tightening residential mortgage standards are the prospects for the Dutch housing market.Some banks reported changes in the mortgage lending conditions, such as margin markups, higher collateral requirements and tightening of the loan-to-value ratio.At the same time, factors such as capital costs and balance sheet restrictions were not quoted as reasons to tighten residential mortgage standards.Although the banks do expect to see a further tightening of acceptance criteria on residential mortgages, they also perceive a levelling trend.

Most banks reported a further decline of the demand for home financing loans.A number of banks expected to see a further decline during the second quarter.