European bank lending worse in first quarter 2008

EZB, The euro area bank lending survey, April 2008:
The results of the April 2008 bank lending survey indicate a further increase in the net tightening of credit standards for loans to enterprises (up from 41% in the fourth quarter of 2007 to 49% in the first quarter of 2008), with net tightening increasing more for large than for small and medium-sized enterprises. Banks’ risk perception regarding general economic activity, the industry or firm-specific outlook, and the cost of banks’ funds and balance sheet constraints contributed to the further increase observed in banks’ net tightening of credit standards. Banks also reported a further increase in the net tightening of credit standards for loans to households for house purchase (up from 21% in the fourth quarter of 2007 to 33% in the first quarter of 2008). In addition, the net tightening of credit standards for consumer credit and other lending to households rose (up from 10% in the fourth quarter of 2007 to 19% in the first quarter of 2008).


With regard to demand for loans, banks reported that net demand for loans to enterprises was negative in the first quarter of 2008, a decline by comparison with the slightly positive net demand observed in the previous quarter. Net demand for loans to households for house purchase also fell further in the first quarter of 2008 and was negative, while net demand for consumer credit and other lending to households was broadly unchanged over the same period.


Banks reported that their access to wholesale funding had deteriorated over the past three months, especially as regards securitisation activity. In addition, the percentage of banks reporting that events in financial markets are having a considerable impact on the cost related to their capital position and some impact on lending has increased over the past three months.


The sample group of banks participating in the survey comprises 113 banks, representing all of the euro area countries, and takes into account the characteristics of their respective national banking structures. Since these banks differ considerably in terms of size, the survey results are weighted according to the national shares of total outstanding euro area lending to euro area residents. All 113 banks participated in the April 2008 survey (i.e. there was an overall response rate of 100%).


source: The euro area bank lending survey, April 2008
European Central Bank
http://www.ecb.int/stats/pdf/blssurvey_200802.pdf