ECB Releases Results of Bank Lending Survey for Fourth Quarter of 2020
ECB published results of the quarterly lending survey conducted on 143 banks in the euro area. The results reported in the survey relate to changes observed in the fourth quarter of 2020 and expected changes in the first quarter of 2021, unless otherwise indicated. The loan categories include loans to enterprises, loans to households for house purchase, and consumer credit and other lending to households. In addition to results for the euro area as a whole, the report also presents results for the four largest euro area countries—namely, Germany, France, Italy, and Spain. Bundesbank has separately published the results of the quarterly lending survey conducted on 34 banks in Germany. The ECB report reveals a net tightening of the credit standards on loans to firms in EU in the fourth quarter of 2020.
The ECB lending survey included a number of ad hoc questions that address the impact of various factors on changes in banks’ lending conditions and demand for loans; these factors include the impact of the situation in financial markets on banks’ access to retail and wholesale funding, the impact of new regulatory and supervisory requirements on banks’ lending policies, the impact of banks’ non-performing loan ratios on their lending policies, and the impact of government loan guarantees related to the COVID-19 pandemic. Euro area banks indicated that regulatory or supervisory actions continued to strengthen banks’ capital position and had a strong easing impact on their funding conditions in 2020. Banks also reported that supervisory or regulatory actions continued to have a net tightening impact on their credit standards across all loan categories. Euro area banks reported that nonperforming loans had a tightening impact on credit standards and on terms and conditions for loans to enterprises and consumer credit in the second half of 2020 (and a broadly neutral impact for housing loans). Risk perceptions and risk aversion were the main drivers of the tightening impact of nonperforming loan ratios.
The survey revealed that the net percentage of banks reporting a tightening of credit standards for loans or credit lines to firms was somewhat higher than in the previous round. Credit standards for loans to households also tightened but at a slower pace than in the previous quarters of 2020. Banks referred to the deterioration of the general economic outlook, increased credit risk of borrowers, and a lower risk tolerance as relevant factors for the tightening of their credit standards for loans to firms and households. Looking at a sectoral breakdown, respondent banks indicated a net tightening of credit standards for loans to enterprises across all main sectors of economic activities in the second half of 2020. The net tightening was most pronounced for loans to firms in the commercial real estate and the wholesale and retail trade sectors. Looking forward, in the first quarter of 2021, banks expect credit standards to continue to tighten for loans to firms and households. Also, in the first quarter of 2021, banks expect net demand for loans to firms, and for consumer credit, to increase and net demand for housing loans to decline.
Related Links
Keywords: Europe, EU, Banking, Bank Lending Survey, COVID-19, Credit Risk, Basel, NPL, Bundesbank, ECB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
RBI Releases List of Domestic Systemically Important BanksRelated Articles
OSFI Issues Phase2 Consultation on Climate Scenario Exercise for Banks
The Office of the Superintendent of Financial Institutions (OSFI) recently announced a consultation on the second phase of the Standardized Climate Scenario Exercise (SCSE) for banks and other financial institutions it regulates in Canada.
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
