The euro area bank lending survey First quarter of 216 April 216
Contents Introduction 3 1 Overview of the results 4 2 Developments in credit standards, terms and conditions and net demand for loans in the euro area 8 2.1 Loans to enterprises 8 2.2 Loans to households for house purchase 13 2.3 Consumer credit and other lending to households 17 3 Ad hoc questions 22 3.1 Banks access to retail and wholesale funding 22 3.2 The impact of the ECB s expanded asset purchase programme 23 3.3 The impact of the ECB s negative deposit facility rate 27 3.4 Banks current level of credit standards 28 Annex 1 Results for the standard questions 31 Annex 2 Results for the ad hoc questions 44 Glossary 49
Introduction The results reported in the April 216 bank lending survey (BLS) relate to changes during the first quarter of 216 and expectations of changes in the second quarter of 216. The survey was conducted between 11 and 3 March 216. The response rate was 1%. In addition to the results for the euro area as a whole, the report contains the results for the five largest euro area countries. 1 A number of ad hoc questions were included in the April 216 survey round. The first ad hoc question addressed the impact of the situation in financial markets on banks access to retail and wholesale funding. The second, third and fourth questions were aimed at gauging the impact of the ECB s expanded asset purchase programme (APP).The fifth question refers to the impact of the ECB s negative deposit facility rate, and the last ad hoc question refers to the level of credit standards compared with a historical range. 1 The five largest euro area countries in terms of gross domestic product are Germany, France, Italy, Spain and the Netherlands. The euro area bank lending survey, April 216 3
1 Overview of the results According to the April 216 bank lending survey (BLS), improving loan supply conditions for enterprises and the continued increase in loan demand across all loan categories are supporting the ongoing recovery in loan growth. In the first quarter of 216, euro area banks reported a further net easing of credit standards for loans to enterprises (net percentage of reporting banks at -6%, compared with -4% in the previous quarter; see Table A), which was stronger than the historical average calculated over the period since the start of the survey in 23. The net easing was slightly more pronounced than expected in the previous survey round. By contrast, credit standards on loans to households for house purchase tightened (4%, up from -7%), while remaining below the historical average since 23. Banks had expected them to remain broadly unchanged. Credit standards on consumer credit and other lending to households returned to a net easing (-3%, down from 1%). For the second quarter of 216, banks expect a continued net easing of credit standards on loans to enterprises (-4%) and for consumer credit (- 7%). By contrast, they expect a continued net tightening of credit standards on housing loans (7%). Competition remained the main factor behind the net easing of credit standards on loans to enterprises during the first quarter of 216. Both risk perceptions and banks reduced cost of funds and balance sheet constraints continued to contribute marginally to the net easing, while banks risk tolerance had a marginal tightening impact. The net tightening of credit standards on loans to households for house purchase was largely driven by the implementation of the EU mortgage credit directive, particularly in Germany, and by a net tightening impact of banks risk tolerance. By contrast, competition continued to have a considerable easing impact. The net easing of banks overall terms and conditions on new loans continued for loans to enterprises and intensified for housing loans and consumer credit, mainly driven by loan margins (defined as spread over relevant market reference rates). As with credit standards, competition continued to contribute the most to the net easing of terms and conditions. The share of rejected applications for loans to enterprises and housing loans decreased in net terms, whereas it increased for consumer credit. Net loan demand continued to increase for loans to enterprises, but was less pronounced (17%, down from 27%; see Table A). Net demand for housing loans increased further (32%, up from 29% in the previous quarter), driven mainly by the low general level of interest rates, but also continued favourable housing market prospects. Moreover, net demand for consumer credit continued to increase (16%, down from 21%), mainly driven by spending for durable goods. For the largest euro area countries, credit standards for loans to enterprises eased in Italy and Germany, while remaining unchanged in Spain and the Netherlands and The euro area bank lending survey, April 216 4
continuing to tighten in France in net terms. For housing loans, banks in Italy and Spain reported a net easing of credit standards, whereas banks in Germany and the Netherlands reported a net tightening. Credit standards on housing loans remained unchanged in France (see Table A). Table A Latest developments in BLS results in the largest euro area countries (net percentages of banks reporting tightening credit standards or positive loan demand) ENTERPRISES HOUSE PURCHASE CONSUMER CREDIT Country Credit standards Dem and Credit standards Dem and Credit standards Dem and 15Q4 16Q1 AVG 15Q4 16Q1 AVG 15Q4 16Q1 AVG 15Q4 16Q1 AVG 15Q4 16Q1 AVG 15Q4 16Q1 AVG EURO AREA -4-6 11 27 17-5 -7 4 8 29 32 1 1-3 6 21 16-2 Germany -6 5 34 22 3 21 2 7 21 9 3 1 13 8 Spain 11 4-1 -3-11 19 33-11 -12-2 1 5 2-1 France 4 4 8-1 13-16 -15 3 9 26 5-2 -6 43-4 Italy -38-38 18 5 38 2-25 -13 3 63 75 11-25 9 63 25 11 Netherlands 11 23 24-5 -8 14 19 97 89-11 3 14-3 -21 Notes: AVG stands for historical averages, which are calculated over the period since the beginning of the survey, excluding the most recent round. For France, Malta, Slovakia and the Netherlands, net percentages are weighted based on the amounts outstanding of loans of the individual banks in the respective national samples. The April 216 BLS also included some ad hoc questions. Regarding euro area banks access to funding, access to retail funding remained unchanged in the first quarter. As regards wholesale funding, access to debt securities deteriorated, while banks access to securitisation improved. With respect to the impact of the ECB s expanded asset purchase programme (APP), banks have mainly used the additional liquidity related to the APP to grant loans. At the same time, euro area banks reported that the APP had a negative impact on their profitability. The net easing impact of the APP appears to be stronger for terms and conditions than for the credit standards of euro area banks, although the impact on the former has declined compared with the October 215 survey. The ECB s negative deposit facility rate has had a positive impact on lending volumes, in particular for loans to households, while having a negative impact on banks net interest income and loan margins. Finally, with regard to the current level of credit standards for both loans to enterprises and housing loans, euro area banks assessed their current level of credit standards as tighter than the historical range since 23, despite the overall net easing that has occurred during the past year. At the same time, euro area banks assessed their current level of credit standards on loans to enterprises as broadly comparable with the shorter range since the second quarter of 21. Box 1 General notes The bank lending survey (BLS) is addressed to senior loan officers of a representative sample of euro area banks. In the current survey round, the sample group of banks participating in the survey comprises 141 banks, representing all of the euro area countries, and takes into account the The euro area bank lending survey, April 216 5
characteristics of their respective national banking structures. The main purpose of the BLS is to enhance the understanding of bank lending behaviour in the euro area. 2 The questions distinguish between three loan categories: loans or credit lines to enterprises; loans to households for house purchase; and consumer credit and other lending to households. For all three categories, questions are asked on credit standards for approving loans, credit terms and conditions on new loans, credit demand, the factors affecting loan supply and demand conditions and the share of loan rejections. The survey questions are generally phrased in terms of changes over the past three months (in this case in the first quarter of 216) or expectations of changes over the next three months (i.e. in the second quarter of 216). The responses to questions related to credit standards are analysed in this report by focusing on the difference ( net percentage ) between the share of banks reporting that credit standards applied to the loan approval have been tightened and the share of banks reporting that they have been eased. A positive net percentage indicates that a larger proportion of banks has tightened credit standards ( net tightening ), whereas a negative net percentage indicates that a larger proportion of banks has eased credit standards ( net easing ). Likewise, the term net demand refers to the difference between the share of banks reporting an increase in loan demand (i.e. in bank loan financing needs) and the share of banks reporting a decline. Net demand will therefore be positive if a larger proportion of banks have reported an increase in loan demand, whereas negative net demand indicates that a larger proportion of banks have reported a decline in loan demand. In order to describe the developments in survey replies over time, the report refers to changes in the net tightening or net easing of credit standards from one survey round to another. For example, a lower net percentage of banks tightening their credit standards between two survey waves would be referred to as a decline in net tightening. Similarly, higher net percentages of banks indicating a decline in loan demand between two survey waves would be referred to as a more pronounced net decline in demand. In addition, an alternative measure of the responses to questions related to changes in credit standards and net demand is included. This measure is the weighted difference ( diffusion index ) between the share of banks reporting that credit standards have been tightened and the share of banks reporting that they have been eased. Likewise, regarding the demand for loans, the diffusion index refers to the weighted difference between the share of banks reporting an increase in loan demand and the share of banks reporting a decline. The diffusion index is constructed in the following way: lenders who have answered considerably are given a weight twice as high (score of 1) as lenders having answered somewhat (score of.5). The interpretation of the diffusion indices follows the same logic as the interpretation of net percentages. The results of the individual banks participating in the BLS sample are aggregated in two steps: in the first step, individual bank results are aggregated to national results for the euro area countries, and in the second step, the national BLS results are aggregated to euro area BLS results. In the first step, banks replies can either be aggregated to national results by applying an implicit 2 For more detailed information on the bank lending survey, see the article entitled A bank lending survey for the euro area, Monthly Bulletin, ECB, April 23, and Berg J. et al., The bank lending survey for the euro area, Occasional Paper Series, No 23, ECB, 25. The euro area bank lending survey, April 216 6
weighting through the sample selection or, alternatively, banks replies can be aggregated by applying an explicit weighting scheme based on the amounts outstanding of loans to non-financial corporations and households of the individual banks in the respective national samples. In the second step, since the number of banks in the national samples differs considerably and does not always reflect the respective share in lending to euro area non-financial corporations and households, the national survey results are aggregated to euro area BLS results by applying an explicit weighting scheme based on the national shares in the amounts outstanding of loans to euro area non-financial corporations and households. For France, Malta, the Netherlands and Slovakia, net percentages are weighted based on the amounts outstanding of loans of the individual banks in the respective national samples. Detailed tables and charts based on the responses are provided in Annex 1 for the standard questions and in Annex 2 for the ad hoc questions. A copy of the questionnaire can be found at http://www.ecb.europa.eu/stats/money/surveys/lend/html/index.en.html The euro area bank lending survey, April 216 7
2 Developments in credit standards, terms and conditions and net demand for loans in the euro area 2.1 Loans to enterprises 2.1.1 Credit standards for loans to enterprises eased further in the first quarter of 216 In the first quarter of 216, banks reported a further net easing in credit standards, thereby continuing to support the recovery of loan growth. Chart 1 Changes in credit standards applied to the approval of loans or credit lines to enterprises, and contributing factors (net percentages of banks reporting tightening credit standards, and contributing factors) 1 credit standards - actual credit standards - expected 1 3 banks' risk tolerance risk perceptions competition cost of funds and balance sheet constraints 3 2 2 5 5 1 1-1 -1-2 -2-5 -5-3 -3-1 -4-1 -4-5 -5-15 214Q1 214Q2 214Q3 214Q4 215Q1 215Q2 215Q3 215Q4 216Q1 216Q2-6 -15 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 DE ES FR IT NL -6 Notes: Actual values are changes that have occurred, while expected values are changes anticipated by banks. Net percentages are defined as the difference between the sum of the percentages of banks responding tightened considerably and tightened somewhat and the sum of the percentages of banks responding eased somewhat and eased considerably. The net percentages for responses to questions related to the factors are defined as the difference between the percentage of banks reporting that the given factor contributed to a tightening and the percentage reporting that it contributed to an easing. Cost of funds and balance sheet constraints are an unweighted average of cost related to capital position, access to market financing and liquidity position ; risk perceptions are an unweighted average of general economic situation and outlook, industry or firm-specific situation and outlook/borrower s creditworthiness and risk on collateral demanded ; competition is an unweighted average of bank competition, non-bank competition and competition from market financing. Risk tolerance was introduced in Q1 215. Banks reported a further net easing of credit standards on loans to enterprises in the first quarter of 216 (-6%, down from -4% in the previous quarter; see Chart 1 and Table A), which was slightly more pronounced than expected in the previous survey The euro area bank lending survey, April 216 8
round. 3 Across firm size, credit standards were eased more strongly for loans to large firms than to small and medium-sized enterprises (SMEs). For the large euro area countries, credit standards on loans to enterprises eased in Italy and Germany, while remaining unchanged in Spain and the Netherlands and continuing to tighten in France in net terms. Looking ahead to the second quarter of 216, euro area banks expect a continued net easing of credit standards on loans to enterprises (-4%). Table 1 Factors contributing to the net tightening of credit standards on loans or credit lines to enterprises (net percentages) Cost of funds and balance sheet constraints Pressure from competition Perception of risk Banks' risk tolerance During the first quarter, competition remained the main factor behind the net easing of credit standards. In addition, both risk perceptions and banks cost of funds and balance sheet constraints continued to contribute marginally to the net easing, while banks risk tolerance had a marginal tightening impact (see Chart 1 and Table 1). 4 Country 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 Euro area -1-2 -7-1 -2-1 1 2 DE 1-1 -1-4 -1 3-3 ES -7 1 FR 1-7 -8-12 9 4 IT -8-8 -17-13 -21-13 NL 1-25 -24-8 Note: See the note for Chart 1. Across the large euro area countries, banks competitive pressures had an easing impact on standards in all countries, but especially in the Netherlands. Reduced risk perceptions accounted for easing effects on standards in Italy, while they had a tightening impact in France. Cost of funds and balance sheet constraints contributed to an easing in France, while this factor remained broadly unchanged for other large countries. Concerning the impact of risk tolerance, banks in Germany reported a marginal easing contribution, while banks in France indicated a tightening impact. 2.1.2 Terms and conditions for loans to enterprises continued to improve in the first quarter of 216 In the first quarter of 216, overall terms and conditions that banks apply when granting new loans to enterprises continued to ease (see Chart 2 and Table 2), which suggests a continued improvement in financing conditions for loans to enterprises. 3 4 Net percentages are defined as the difference between the sum of the percentages of banks responding tightened considerably and tightened somewhat and the sum of the percentages of banks responding eased somewhat and eased considerably. The net percentages for responses to questions related to the factors are defined as the difference between the percentage of banks reporting that the given factor contributed to a tightening and the percentage reporting that it contributed to an easing. In order to describe the developments in survey replies over time, the report refers to changes (i.e. declines or increases) in the net tightening or net easing of credit standards from one survey round to another. For example, a lower net percentage of banks tightening their credit standards between two survey waves would be referred to as a decline in net tightening. The calculation of a simple average for aggregating some factors to main categories assumes that all factors have the same importance for the banks. This partly explains some inconsistencies in the respective charts between the development of credit standards and the development of the main underlying factor categories. The euro area bank lending survey, April 216 9
Chart 2 Changes in terms and conditions for loans or credit lines to enterprises (net percentages of banks reporting tightening terms and conditions) 2 overall terms and conditions 2 4 other terms and conditions collateral requirements margins on riskier loans margins on average loans 4 1 1 2 2-2 -2-1 -1-4 -4-2 -2-6 -6-3 -3-8 -8-4 -1-4 -1-5 214Q1 214Q2 214Q3 214Q4 215Q1 215Q2 215Q3 215Q4 216Q1-12 -5 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 DE ES FR IT NL -12 Notes: Margins are defined as the spread over a relevant market reference rate. Other terms and conditions are an unweighted average of non-interest rate charges, size of the loan or credit line, loan covenants and maturity. Overall terms and conditions were introduced in Q1 215. Across the largest euro area countries, terms and conditions eased in all larger countries except for the Netherlands. A considerable net percentage of euro area banks reported a further narrowing of margins on average loans to enterprises, while they indicated broadly unchanged margins on riskier loans. Other terms and conditions on new loans or credit lines, such as non-interest rate charges, loan size, collateral and maturity, also continued to ease during the first quarter of 216. Table 2 Changes in terms and conditions for loans or credit lines to enterprises Table 3 Factors contributing to the net tightening of terms and conditions for loans or credit lines to enterprises (net percentage changes) Overall terms and conditions Banks' margins on average loans Banks' margins on riskier loans Country 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 Euro area -17-12 -26-21 -5 2 DE -24-12 -15-15 -12-6 ES -2-3 -3-4 FR -16-14 -2-25 -7-2 IT -13-13 -38-38 -13 NL -23 3-25 3 28 (net percentages of banks reporting tightening terms and conditions) Cost of funds and balance sheet constraints Pressure from competition Perception of risk Banks' risk tolerance Country 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 Euro area -5 1-22 -28-5 -1 3 2 DE -6-21 -12-9 3-3 ES -2-2 -4-1 1 FR 4 2-13 -34 3 4 IT -25-25 -5-13 NL 2 28-25 -24-25 Note: See note for Chart 2. The euro area bank lending survey, April 216 1
Chart 3 Change in the share of rejected applications for loans to enterprises (net percentages of banks reporting an increase in the share of rejections) In most of the large euro area countries, particularly Italy and Spain, banks continued to report a narrowing of margins on average loans in net terms. Margins on riskier loans widened considerably in the Netherlands. In the other large countries, margins on riskier loans either remained unchanged or narrowed further. Banks in Spain reported a net tightening of collateral requirements, whereas no tightening of the other terms and conditions was recorded in the other large countries. Regarding the factors contributing to changes in credit terms and conditions, competition contributed strongly to the easing in all large euro area countries (see Table 3). In addition, the considerable net easing of overall credit terms and conditions in Spain was driven by a reduction in banks cost of funds and balance sheet constraints. By contrast, the same factor contributed strongly to the net tightening of terms and conditions in the Netherlands. 15 1 215Q2 215Q3 215Q4 216Q1 15 1 2.1.3 Rejection rate for loans to enterprises has decreased 5 5 Euro area banks continued to reduce their rejection rate for loan applications from enterprises (i.e. the difference -5-5 between the sum of the percentages of banks reporting -1-15 -2-25 -1-15 -2-25 an increase and that of banks reporting a decline in the share of loan rejections), in net terms, during the first quarter of 216 (-4%, compared with -3% in the previous quarter; see Chart 3). -3 EA DE ES FR IT NL Notes: Share of loan rejections relative to the volume of all loan applications in that loan category. -3 Across the largest euro area countries, the rejection rate decreased in Italy and Spain, while remaining unchanged in the other countries. 2.1.4 Increase in net demand for loans to enterprises Net demand for loans to enterprises continued to increase in the first quarter of 216 (17%, down from 27% in the previous quarter; see Chart 4 and Table A). 5 While this rise was below banks expectations reported in the previous round, banks expect an increase in loan demand from enterprises in the second quarter of 216. 5 Net percentages for the questions on demand for loans are defined as the difference between the sum of the percentages of banks responding increased considerably and increased somewhat and the sum of the percentages of banks responding decreased somewhat and decreased considerably. The net percentages for responses to questions related to each factor are defined as the difference between the percentage of banks reporting that the given factor contributed to increasing demand and the percentage reporting that it contributed to decreasing demand. In order to describe the developments in survey replies over time, the report refers to changes in the net demand for loans from one survey round to another. For instance, higher net percentages of banks indicating a decline in loan demand between two survey waves would be referred to as a more pronounced net decline in demand. The euro area bank lending survey, April 216 11
All large euro area countries with the exception of Spain reported an increase in loan demand in the first quarter of 216. Chart 4 Changes in demand for loans or credit lines to enterprises, and contributing factors (net percentages of banks reporting positive demand, and contributing factors) 8 demand - actual demand - expected 82 use of alternative finance other financing needs general level of interest rates inventories and working capital fixed investment 2 175 175 6 6 15 15 4 125 4 1 125 1 2 75 2 75 5 5 25 25-2 -2-25 -25-5 -5-4 214Q1 214Q2 214Q3 214Q4 215Q1 215Q2 215Q3 215Q4 216Q1 216Q2-4 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 DE ES FR IT NL Notes: Actual values are changes that have occurred, while expected values are changes anticipated by banks. Net percentages for the questions on demand for loans are defined as the difference between the sum of the percentages of banks responding increased considerably and increased somewhat and the sum of the percentages of banks responding decreased somewhat and decreased considerably. The net percentages for responses to questions related to each factor are defined as the difference between the percentage of banks reporting that the given factor contributed to increasing demand and the percentage reporting that it contributed to decreasing demand. Other financing needs are an unweighted average of M&A and corporate restructuring and debt refinancing/restructuring and renegotiation ; use of alternative finance is an unweighted average of internal financing, loans from other banks, loans from non-banks, issuance/redemption of debt securities and issuance/redemption of equity. General level of interest rates was introduced in Q1 215. Table 4 Factors contributing to net demand for loans or credit lines to enterprises (net percentages) Fixed investment Country 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 Euro area 15 8 16 16 1 12 25 14-2 -2 DE 29 12 9 9 13 13 18 12-7 -7 ES 1-2 4 4 5 3 2-4 -8 FR -8 7-14 2 11 13-1 6 IT 38 38 63 38 13 6 63 25 NL -2-2 24 38 25 24 15 5 Note: See note for Chart 4. Inventories and working capital Other financing needs General level of interest rates Use of alternative finance The main contributing factors for loan demand were inventories and working capital, the general level of interest rates, M&A activity (included in other financing needs) and fixed investment (see Chart 4 and Table 4). 6 The less pronounced increase in loan demand was on account of a smaller contribution from fixed investment and the general level of interest rates. The use of alternative finance continued to have a slightly dampening effect on net loan demand by euro area firms. In particular, the internal financing of firms and, to a smaller extent, the issuance of debt securities by enterprises contributed negatively to loan demand. Across the large euro area countries, the solid contribution to loan demand from inventories and working capital was a result of developments in Germany, Italy and 6 The calculation of a simple average for aggregating some factors to main categories assumes that all factors have the same importance for the banks. This partly explains some inconsistencies between the development of demand for loans and that of the main underlying factor categories. The euro area bank lending survey, April 216 12
Spain. The low level of interest rates continued to contribute to increased loan demand in all large countries with the exception of France. The positive contribution from M&A activity was related to developments in all large euro area countries except for Italy. Moreover, the smaller positive contribution from fixed investment compared with the previous quarter was due to developments in Germany and Spain, the contribution from the latter turning negative. In the Netherlands, other financing needs contributed strongly to loan demand, which was mainly related to debt refinancing and renegotiation, which may in turn be related to the prolongation of loans at more attractive conditions. By contrast, the use of alternative finance had a dampening impact on loan demand in Germany and Spain, related to both available internal funds and other external financing. 2.2 Loans to households for house purchase 2.2.1 Credit standards for loans to households for house purchase tightened in net terms in the first quarter of 216 For loans to households for house purchase, banks reported a net tightening of their credit standards (4%, up from -7%; see Chart 5 and Table A) which was below the historical average since 23. By contrast, banks had expected broadly unchanged credit standards in the previous survey. Chart 5 Changes in credit standards applied to the approval of loans to households for house purchase, and contributing factors (net percentages of banks reporting tightening credit standards, and contributing factors) 1 credit standards - actual credit standards - expected 1 1 other factors* banks' risk tolerance risk perceptions competition cost of funds and balance sheet constraints 1 8 8 5 5 6 6 4 4 2 2-5 -5-2 -2-1 -1-4 -4-15 214Q1 214Q2 214Q3 214Q4 215Q1 215Q2 215Q3 215Q4 216Q1 216Q2-6 -15 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 DE ES FR IT NL -6 Notes: See the notes for Chart 1. Risk perceptions are an unweighted average of general economic situation and outlook, housing market prospects including expected house price developments and borrower s creditworthiness (the latter from Q1 215 onwards); competition is an unweighted average of competition from other banks and competition from non-banks. Risk tolerance was introduced in Q1 215. *Other factors are provided by banks when none of the above factors are applicable. They are shown as memo item and refer here, in particular, to changes in the regulation and legislation of housing markets. The euro area bank lending survey, April 216 13
Among the large euro area countries, banks in Italy and Spain reported a net easing of credit standards, whereas banks in Germany and the Netherlands reported a net tightening. Credit standards on housing loans remained unchanged in France. Looking ahead, euro area banks expect a continued net tightening of credit standards in the second quarter of 216. Table 5 Factors contributing to the net tightening of credit standards on loans to households for house purchase (net percentages) Cost of funds and balance sheet constraints Pressure from competition Perception of risk Banks' risk tolerance Country 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 The net tightening of credit standards on housing loans was mainly related to the implementation of the EU mortgage credit directive (included in other factors ), which requires an in-depth creditworthiness assessment of borrowers, as well as to the small net tightening impact of banks risk tolerance (see Chart 5 and Table 5). By contrast, competition continued to have a considerable easing impact. Euro area 4 1-6 -1-1 -3 2 DE -3-3 ES -5-1 FR 18-6 -22 2 IT -13-19 -13-4 -8 NL 22-8 -2-3 -11 21 Note: See the note for Chart 5. Among the largest euro area countries, the net tightening impact of the EU mortgage credit directive was driven by banks in Germany and follows the corresponding impact that banks in the Netherlands had reported in the third quarter of 215. In addition, banks in the Netherlands indicated a net tightening impact of banks risk tolerance. Competition had an easing impact in all large euro area countries with the exception of Germany, where it had a neutral impact. Banks risk perceptions had an easing impact on credit standards for housing loans, according to banks in Italy, Spain and the Netherlands, while the impact was neutral elsewhere. Finally, the impact of cost of funds and balance sheet constraints was neutral across the large countries. 2.2.2 Terms and conditions for loans to households for house purchase improved further The net easing of banks overall terms and conditions applied when granting new housing loans intensified in the first quarter of 216 (see Chart 6 and Table 6). The reduction in margins on average loans remained the main driver behind the easing, but margins on riskier loans were also considerably reduced in the first quarter. By contrast, collateral requirements and other terms and conditions, especially loan-to-value ratios, were tightened. Of the larger euro area countries, banks in Spain, Italy and France reported a considerable net easing of overall terms and conditions, mainly driven by margins on average loans and, to a smaller extent, by margins on riskier loans. By contrast, overall terms and conditions tightened marginally in Germany. This was due to a net tightening of housing loan maturities, whereas loan margins eased marginally in net terms for average loans and remained unchanged for riskier loans. In the Netherlands, banks reported a net increase in margins on average loans, collateral The euro area bank lending survey, April 216 14
requirements and other terms and conditions, mainly owing to a considerable tightening of loan-to-value ratios. Chart 6 Changes in terms and conditions for loans to households for house purchase (net percentages of banks reporting tightening terms and conditions) 1 overall terms and conditions 5 8 other terms and conditions collateral requirements margins on riskier loans margins on average loans 8-1 6 4-5 2-1 6 4 2-2 -2-15 -2-3 -4-2 -6-4 -6-25 -8-8 -4-1 -3-1 -12-12 -5 214Q1 214Q2 214Q3 214Q4 215Q1 215Q2 215Q3 215Q4 216Q1-35 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 DE ES FR IT NL Notes: Margins are defined as the spread over a relevant market reference rate. Other terms and conditions are an unweighted average of loan-to-value ratio, other loan size limits (the latter from Q1 215 onwards), non-interest rate charges and maturity. Overall terms and conditions were introduced in Q1 215. Concerning the factors affecting the net easing of the terms and conditions of euro area banks, competition remained the main factor, but the other factors also contributed to the net easing (see Table 7). Table 6 Changes in terms and conditions for loans to households for house purchase Table 7 Factors contributing to the net tightening of terms and conditions for loans to households for house purchase (net percentage changes) Overall terms and conditions Banks' margins on average loans Banks' margins on riskier loans Country 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 Euro area -3-13 -21-32 -1-11 DE 3-9 -3-6 ES -1-4 -3-5 2-1 FR -15-16 -55-38 IT -13-38 -5-88 -13-13 NL -8-7 -23 25 (net percentage changes) Cost of funds and balance sheet constraints Pressure from competition Perception of risk Banks' risk tolerance Country 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 Euro area -1-5 -9-31 -9-3 DE -3 3-3 3-3 3 ES -1-1 -3-1 FR 2-17 -52-2 -28-28 IT -13-38 -88-13 NL 22-8 -7-8 21 Note: See note for Chart 6. Among the large euro area countries, competition contributed to an easing of credit terms and conditions in all countries, particularly France, Italy and Spain. For banks cost of funds and balance sheet constraints and risk perceptions, banks in France and Spain reported an easing impact of terms and conditions for housing loans. The euro area bank lending survey, April 216 15
Chart 7 Change in the share of rejected applications for loans to households for house purchase (net percentages of banks reporting an increase in the share of rejections) Banks in Italy also indicated an easing impact for banks risk perceptions, while the impact was neutral for the other countries. Banks risk tolerance had an easing impact for banks in France, while it had a tightening impact for banks in the Netherlands. 215Q2 215Q3 215Q4 216Q1 3 2 1-1 -2 3 2 1-1 -2 2.2.3 Rejection rate for loans to households for house purchase declined According to euro area banks, the net share of rejected applications for loans to households for house purchase declined further in the first quarter of 216 (to -7%, down from -4% in the previous survey round; see Chart 7). -3 EA DE ES FR IT NL Note: Share of loan rejections relative to the volume of all loan applications in that loan category. -3 Across the largest euro area countries, there were again mixed developments: The rejection rate for housing loans declined in France, Italy and Spain, whereas it remained unchanged for banks in Germany and the Netherlands. 2.2.4 Net demand for housing loans increased further In the first quarter of 216, banks reported a further net increase in demand for housing loans (32%, compared with 29% in the previous quarter; see Chart 8 and Table A). The increase in demand remains above the historical average change in demand and exceeded banks expectations from the previous survey round. All the large euro area countries reported an increase in net demand for housing loans, with the exception of Spain, where it turned negative. For the second quarter of 216, euro area banks expect demand to increase further. The euro area bank lending survey, April 216 16
Chart 8 Changes in demand for loans to households for house purchase, and contributing factors (net percentages of banks reporting positive demand, and contributing factors) 1 demand - actual demand - expected 1 35 use of alternative finance other financing needs general level of interest rates consumer confidence housing market prospects 35 8 3 8 3 25 25 6 6 2 2 4 15 4 15 1 1 2 2 5 5-2 214Q1 214Q2 214Q3 214Q4 215Q1 215Q2 215Q3 215Q4 216Q1 216Q2-2 -5 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 DE ES FR IT NL -5 Notes: See the notes for Chart 4. Other financing needs are an unweighted average of debt refinancing/restructuring and renegotiation and regulatory and fiscal regime of housing markets (both from Q1 215 onwards); use of alternative finance is an unweighted average of internal financing out of savings/down payment (from Q1 215 onwards), household savings (until Q4 214), loans from other banks and other sources of external finance. General level of interest rates was introduced in Q1 215. Table 8 Factors contributing to net demand for loans to households for house purchase (net percentage changes) Housing market prospects Country 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 Euro area 23 25 26 13 3 5 3 43-4 -4 DE 9 12 6 12 4 1 12 24-7 -7 ES 1 1 4 1 3 1-7 -1 FR 17 24 15 1 8 1 61 IT 38 38 38 25 6 19 63 63 NL 98 98 91 47 15-16 97 98-5 -4 Note: See note for Chart 8. Consumer confidence Other financing General level of needs interest rates Use of alternative finance The low level of interest rates, as well as improved housing market prospects, were the main factors contributing to the further rise in demand for housing loans in the euro area (see Chart 8 and Table 8). By contrast, the favourable impact of consumer confidence became smaller in the first quarter. Among the large euro area countries, housing market prospects and the general level of interest rates continued to contribute positively to loan demand in all countries, the impact being particularly strong in the Netherlands, Italy and France. Changes in the regulatory or fiscal regime of housing markets (included in other financing needs ) have dampened loan demand, especially in the Netherlands, partly related to changes in the tax deduction of interest paid on mortgage loans. 2.3 Consumer credit and other lending to households 2.3.1 Net easing of credit standards for consumer credit and other lending to households In the first quarter of 216, credit standards for consumer credit and other lending to households returned to a net easing (-3%, down from 1% in the previous quarter and The euro area bank lending survey, April 216 17
below the historical average; see Chart 9 and Table A). The net easing was slightly below banks expectations for this quarter from the previous survey round. Chart 9 Changes in credit standards applied to the approval of consumer credit and other lending to households, and contributing factors (net percentages of banks reporting tightening credit standards, and contributing factors) 1 credit standards - actual credit standards - expected 1 4 other factors* banks' risk tolerance risk perceptions competition cost of funds and balance sheet constraints 4 5 5 2 2-5 -5-2 -2-1 -1-4 -4-15 214Q1 214Q2 214Q3 214Q4 215Q1 215Q2 215Q3 215Q4 216Q1 216Q2-15 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 DE ES FR IT NL Notes: See the notes for Chart 1. Risk perceptions are an unweighted average of general economic situation and outlook, creditworthiness of consumers and risk on collateral demanded ; competition is an unweighted average of competition from other banks and competition from non-banks. Risk tolerance was introduced in Q1 215. Risk tolerance introduced in 215Q1. *Other factors are provided by banks when none of the above factors are applicable. They are shown as memo item and refer here, in particular, to changes in regulation and legislation. In the large euro area countries, credit standards on consumer credit and other lending to households eased in Italy and Spain, while they were tightened in the Netherlands and in Germany. Table 9 Factors contributing to the net tightening of credit standards for consumer credit and other lending to households (net percentages) Cost of funds and balance sheet constraints Country 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 Euro area -2-3 -5-1 -5-1 DE -3-3 ES -5-1 -13-1 FR 2-7 -7-5 2 IT -6-13 -8 NL -1 Note: See note for Chart 9. Pressure from competition Perception of risk Banks' risk tolerance Looking ahead, euro area banks expect a further net easing of credit standards on consumer credit and other lending to households for the second quarter of 216. Competitive pressures and reduced risk perceptions on the part of banks were the main factors contributing to the net easing of credit standards (see Chart 9 and Table 9). In the large euro area countries, the net easing of credit standards in Italy and Spain was driven mainly by competition and banks risk perceptions, as well as banks having a higher risk tolerance in the case of Spain. The net tightening of terms and conditions in the Netherlands was driven by other factors related to the regular update of the minimum cost of living of households. The euro area bank lending survey, April 216 18
2.3.2 Terms and conditions for consumer credit and other lending to households improved considerably Chart 1 Changes in terms and conditions for consumer credit and other lending to households (net percentages of banks reporting tightening terms and conditions) 5 overall terms and conditions 5 2 other terms and conditions collateral requirements margins on riskier loans margins on average loans 2-5 -5-2 -2-1 -1-15 -4-15 -4-2 -2-6 -6-25 -25-8 -8-3 -3-1 -1-35 214Q1 214Q2 214Q3 214Q4 215Q1 215Q2 215Q3 215Q4 216Q1-35 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 DE ES FR IT NL Notes: Margins are defined as the spread over a relevant market reference rate. Other terms and conditions are an unweighted average of size of the loan (from Q1 215 onwards), non-interest rate charges and maturity. Overall terms and conditions were introduced in Q1 215. Euro area banks reported a considerable improvement in their terms and conditions on consumer credit and other lending to households in the first quarter of 216. This was mainly driven by a narrowing of margins on average loans and, to a lesser extent, on riskier loans (see Chart 1). Non-price terms and conditions, such as loan size and maturity, also contributed to an easing of terms and conditions. In the large euro area countries, loan margins narrowed in France (especially on riskier loans), Italy and Spain (especially on average loans in both cases). By contrast, loan margins, particularly on average loans, tightened in Germany. Regarding banks assessment of the factors contributing to the changes in credit terms and conditions on new loans, competitive pressures and, to a lesser extent, banks cost of funds and reduced balance sheet constraints contributed most to the net easing (see Table 11). Across the largest euro area countries, competition contributed to the net easing of terms and conditions in all countries. In addition, banks cost of funds and balance sheet constraints had an easing contribution in France, Spain and Italy. The euro area bank lending survey, April 216 19
Table 1 Changes in terms and conditions for consumer credit and other lending to households (net percentage changes) Overall terms and conditions Note: See note for Chart 1. Banks' margins on average loans Banks' margins on riskier loans Country 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 Euro area -5-17 -17-16 -6-1 DE -6-12 12-12 3 ES -3-5 -4-6 -1 FR 2-2 -21-9 -38 IT -38-5 -13 NL -28-28 Table 11 Factors contributing to the net tightening of terms and conditions on consumer credit and other lending to households (net percentage changes) Cost of funds and balance sheet constraints Country 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 Euro area -3-1 -8-16 -1 1-2 DE -6-3 -3 ES -1-2 -3-4 -1 FR 2-22 -14-5 2 IT -13-38 -13 NL -35 Note: See note for Chart 1. Pressure from competition Perception of risk Banks' risk tolerance 2.3.3 Rejection rate for consumer credit and other lending to households increased Chart 11 Change in the share of rejected applications for consumer credit and other lending to households (net percentages of banks reporting an increase in the share of rejections) The net share of rejected applications for consumer credit and other lending to households increased in the first quarter of 216 according to the banks (to 4%, up from -4% in the previous survey round; see Chart 11). 4 215Q2 215Q3 215Q4 216Q1 4 Across the largest euro area countries, there were divergent developments, with the rejection rate increasing in France and the Netherlands, and declining 3 3 in Spain. 2 2 1-1 1-1 2.3.4 Continued increase in net demand for consumer credit and other lending to households -2-3 EA DE ES FR IT NL Notes: Share of loan rejections relative to the volume of all loan applications in that loan category. The first data point is for Q1 215. -2 According to euro area banks, net demand for -3 consumer credit and other lending to households continued to increase in the first quarter of 216 at a similar pace to that in the previous quarter (16%, compared with 21%; see Chart 12 and Table A), remaining above its historical average. Across the large euro area countries, net demand increased, particularly in France, and to a more limited extent in Germany, Italy and Spain. By contrast, it declined in the Netherlands. For the second quarter of 216, euro area banks expect a further net increase in the demand for consumer credit and other lending to households. The euro area bank lending survey, April 216 2
Chart 12 Changes in demand for consumer credit and other lending to households, and contributing factors (net percentages of banks reporting positive demand, and contributing factors) 8 demand - actual demand - expected 8 15 use of alternative finance consumption exp. (real estate) general level of interest rates consumer confidence spending on durable goods 15 7 125 125 6 5 6 1 1 4 75 4 75 3 5 5 2 2 25 25 1-25 -25-1 -5-5 -2 214Q1 214Q2 214Q3 214Q4 215Q1 215Q2 215Q3 215Q4 216Q1 216Q2-2 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 215Q2 215Q3 215Q4 216Q1 DE ES FR IT NL Notes: See the notes for Chart 4. Use of alternative finance is an unweighted average of internal financing out of savings (from Q1 215 onwards), household savings (until Q4 214), loans from other banks and other sources of external finance. Consumption exp. (real estate) denotes consumption expenditure financed through real estate-guaranteed loans. General level of interest rates and consumption expenditure financed through real estate-guaranteed loans were introduced in Q1 215. Table 12 Factors contributing to net demand for consumer credit and other lending to households (net percentage changes) Spending on durable goods Country 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 215Q4 216Q1 Euro area 22 23 15 14 1-1 15 13-1 -3 DE 15 9 9 12 3-3 12 18-4 -9 ES 4 2 5 3 3 1-7 FR 2 36 5 9 7 3 3 IT 63 5 25 25 25 25 NL Note: See note for Chart 12. Consumer confidence Consumption exp. (real estate) General level of interest rates Use of alternative finance Among the factors driving demand at euro area level, financing needs for spending on durable consumer goods and, to a lesser extent, consumer confidence and the low level of interest rates continued to contribute to increased demand (see Chart 12 and Table 12). By contrast, the use of alternative finance, in particular internal finance out of savings, contributed negatively to demand for consumer credit. Across the large euro area countries, spending on durable goods contributed positively to demand, particularly in France, Italy and Spain. The general level of interest rates also had a positive impact on demand in all countries except for the Netherlands. Consumer confidence contributed strongest in Spain and Italy to increased net demand for consumer credit. The euro area bank lending survey, April 216 21
3 Ad hoc questions 3.1 Banks access to retail and wholesale funding As in previous survey rounds, the April 216 survey questionnaire included a question to assess the extent to which the situation in financial markets affected banks access to retail and wholesale funding. 7 Chart 13 Banks assessment of funding conditions and the ability to transfer credit risk off-balance sheet Table 13 Banks assessment of funding conditions and the ability to transfer credit risk off-balance sheet (net percentages of banks reporting deteriorated market access) (net percentages of banks reporting deteriorated market access) 2 retail funding debt securities money markets securitisation 2 Retail funding Interbank Wholesale unsecured debt securities Securitisation money market 215Q4-1 1 2-15 216Q1 2 15-12 1 1 Note: See the note for Chart 13. -1-2 -3 214Q1 214Q2 214Q3 214Q4 215Q1 215Q2 215Q3 215Q4 216Q1 216Q2 (exp.) -1-2 -3 For the first quarter of 216, euro area banks reported unchanged access to retail funding. As regards banks access to wholesale funding, access to debt securities deteriorated, while banks access to securitisation improved in net terms (see Chart 13 and Table 13). 8 For money markets, access remained broadly unchanged according to the banks. Notes: The net percentages are defined as the difference between the sum of the percentages for deteriorated considerably and deteriorated somewhat and the sum of the percentages for eased somewhat and eased considerably. Looking ahead, for the second quarter of 216, euro area banks expect an improvement in their access to debt securities markets and a continued improvement in their access to retail funding and securitisation. 7 8 The results shown are calculated as a percentage of the number of banks which did not reply not applicable. However, for the results on securitisation, there are a large number of banks that replied not applicable, as this source of funding is not relevant for them (around 45% in the first quarter of 216). The euro area bank lending survey, April 216 22