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    BoE Survey Examines Trends in Credit Conditions of Banks

    July 16, 2020

    BoE published results of the credit conditions survey for the second quarter of 2020. The survey was conducted among bank and building society lenders and it covered secured and unsecured lending to households and lending to non-financial corporations, small businesses, and non-bank financial firms. The results are based on lenders’ responses to the survey and are reported as net percentage balances. The results show that the availability of secured and unsecured credit to households decreased in the second quarter while the availability of credit to the corporate sector decreased during this time period.

    The lenders expect the availability of secured and unsecured credit to decrease further in the third quarter. The results also highlight that demand for secured lending for both house purchase and remortgaging decreased in the second quarter, but it is expected to increase in the third quarter. Lenders reported that the overall demand for unsecured lending decreased in the second quarter, comprising a decrease in both demand for credit card and other unsecured lending. However, the lenders expect the overall demand for unsecured lending to increase in the third quarter. The net percentage balance for changes in losses given default on secured loans decreased in the second quarter, but is expected to increase in the third quarter. The net percentage balance for changes in default rates for total unsecured lending increased in the second quarter and is expected to increase further in the third quarter.

    Lenders reported that the availability of credit to the corporate sector increased for all business sizes in the second quarter. Total corporate credit availability was expected to increase only slightly in the third quarter. Several lenders noted that the schemes recently launched by the government to support lending to businesses underpinned the reported increase in availability in the second quarter. Lenders reported that demand for corporate lending from businesses of all sizes increased in the second quarter, but expected to decrease in the third quarter. Furthermore, the length of interest-free periods on credit cards for balance transfers, and on purchases, decreased in the second quarter and lenders expected both to decrease in the third quarter.

    The credit conditions survey, which is aimed at improving the understanding of trends and developments in credit conditions, was conducted between June 01, 2020 and June 19, 2020. Lenders were asked to report changes in three months till the end of May 2020 (second quarter), relative to the period between December and February, and expected changes in the three months till end of August 2020 (third quarter), relative to the period between March and May. The credit conditions survey for the third quarter of 2020 will be published on October 15, 2020. 

     

    Related Link: Survey Results and Related Documents

     

    Keywords: Europe, UK, Banking, Credit Risk, Credit Conditions Survey, Default Risk, Mortgage Lending, BoE

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