Bank

Introduction

• The survey was conducted between 4 and 29 December 2020.
• A total of 143 banks were surveyed in this round, with a response rate of 100%.
• In addition to results for the euro area as a whole, this report also contains results for the four largest euro area countries.

1 Overview of results

• The January 2021 BLS results show a net tightening of credit standards on loans to firms in the fourth quarter of 2020.
• In the first quarter of 2021, banks expect a continued tightening of credit standards for loans to enterprises.
• This might reflect the fact that firms had already built-up precautionary liquidity buffers in the previous quarters.
• Demand for fixed investment continued to weigh on loan demand as it declined for the fourth consecutive quarter.
• Banks expect a continued net tightening of credit standards and a slight decline in housing loan demand in the first quarter of 2021.
• In the first quarter of 2021, banks expect a continued net tightening of credit standards on loans to firms (20%).
• Firms demand for loans or drawing of credit lines declined further in the fourth quarter of 2020 (net percentage of -12%, after -4% in the third quarter of 2020; see Overview table).
• Across the largest euro area countries, credit standards on loans to enterprises tightened in Germany, Spain and France, while they remained unchanged in Italy in the fourth quarter of 2020 (see Overview table).
• Demand for housing loans continued to increase in Germany and France, while it declined in Spain and remained unchanged in Italy.
• Overview table Latest BLS results for the largest euro area countries (net percentages of banks reporting a tightening of credit standards or an increase in loan demand)
• Banks expect a lower net tightening of credit standards for new loans to enterprises across all main sectors of economic activities in the first half of 2021.
• In line with this, banks indicated a tightening of their lending conditions for loans to enterprises without government guarantees in 2020.
• Banks also expect an increase in firms demand for loans with and without government guarantees over the next six months.
• Box 1General notes The bank lending survey (BLS) is addressed to senior loan officers at a representative sample of euro area banks.
• The main purpose of the BLS is to enhance the Eurosystems knowledge of bank lending conditions in the euro area.
• Aggregation of banks replies to national and euro area BLS results The responses of the individual banks participating in the BLS are aggregated in two steps.
• In the first step, the responses of individual banks are aggregated to form national results for euro area countries.
• And in the second step, those national BLS results are aggregated to form euro area BLS results.
• It has been applied to all euro area and national BLS results in the current BLS questionnaire, including backdata.
• For country results, net percentage changes are reported in a factual manner, as differing sample sizes across countries mean that the answers of individual banks have differing impacts on the magnitude of net percentage changes.
• In addition, BLS time series data are available on the ECBs website via the Statistical Data Warehouse.

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 tightened

• The smaller net tightening over the course of the pandemic compared to previous crises is likely related to supportive monetary and fiscal policy actions.
• Notably, banks reported a significant easing of credit standards on loans with COVID-19-related government guarantees in 2020 (see Section 3.5).
• The net tightening in the fourth quarter of 2020 was stronger for loans to SMEs (25% vs. 16% for large enterprises) and for long-term loans (26% vs. 19% for short-term loans).
• Banks continued to refer to risk perceptions related to the deterioration in the general economic and the firm-specific situation as the main factor contributing to the tightening of credit standards (see Chart 1 and Table 1).
• Across the largest euro area countries, credit standards on loans to enterprises tightened in Germany, Spain and France, while they remained unchanged in Italy in the fourth quarter of 2020.
• Euro area banks expect a continued net tightening of credit standards on loans to firms (net percentage of 20%) in the first quarter of 2021, reflecting the continued uncertainties around the further development of the pandemic and its effects on borrowers credit risk.
• 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 a tightening of credit standards and contributing factors)


Table 1 Factors contributing to changes in credit standards for loans or credit lines to enterprises (net percentages of banks)

2.1.2 Terms and conditions on loans to enterprises continued to tighten

• banks actual terms and conditions agreed in the loan contract) for new loans to enterprises continued to tighten in the fourth quarter of 2020 (net percentage of 14%, after 8%; see Chart 2 and Table 2).
• Margins on average loans to firms (defined as the spread over relevant market reference rates) tightened moderately, while margins on riskier loans continued to tighten more strongly.
• These developments reflect the tightening of some components of banks terms and conditions, while bank lending rates remain historically low.
• Chart 2 Changes in terms and conditions on loans or credit lines to enterprises (net percentages of banks reporting a tightening of terms and conditions)


Table 2 Changes in terms and conditions on loans or credit lines to enterprises (net percentages of banks)

• Risk perceptions continued to be the main contributor to the net tightening of banks overall terms and conditions (see Table 3).
• Across the largest euro area countries, overall terms and conditions on new loans or credit lines to enterprises tightened in Germany, France and Spain, while they remained unchanged in Italy.
• Banks in France reported a continued net easing of margins for average loans, but a strong net tightening of collateral requirements.
• Table 3 Factors contributing to changes in overall terms and conditions on loans or credit lines to enterprises (net percentages of banks)

2.1.3 Rejection rate for loans to enterprises slightly increased

• In the fourth quarter of 2020, the net rejection rate for loans to euro area enterprises continued to increase slightly (net percentage of banks reporting an increase standing at 2%, after 3% in the third quarter of 2020; see Chart 3).
• Across the largest euro area countries, the net rejection rate increased in Germany and Spain, while it decreased in Italy and remained unchanged in France.
• Chart 3 Changes in the rejection rate for loans to enterprises (net percentages of banks reporting an increase in the share of rejections)

2.1.4 Lower net demand for loans to enterprises

• The reported net decline is consistent with the observed lower realised loan flows to non-financial corporations in recent months.
• While the net decline in loan demand was similar for SMEs (net percentage of -10%) and large firms (-8%), it was significantly larger for long-term loans (-16%) than short-term loans (-3%).
• Banks reported that demand for inventories and working capital continued to contribute positively to net demand for loans, although its contribution was smaller than in the first half of 2020 (see Chart 4 and Table 4).
• [5] Chart 4 Changes in demand for loans or credit lines to enterprises and contributing factors (net percentages of banks reporting an increase in demand and contributing factors)


Table 4 Factors contributing to changes in demand for loans or credit lines to enterprises (net percentages of banks)

• Across the largest euro area countries, banks reported a net increase in demand for loans to firms in Germany and Italy, while they reported a net decline in France and Spain.
• In Italy, other financing needs mainly debt refinancing and renegotiation also contributed strongly to the net increase in loan demand.
• This may be related to firms substituting existing loans with government guaranteed loans, as substitution of loans was an important factor contributing to demand for guaranteed loans according to Italian banks (see Section 3.5).
• In the first quarter of 2021, banks expect a moderate net increase in demand for loans to firms (net percentage of 5%).

2.2 Loans to households for house purchase

2.2.1 Credit standards for loans to households for house purchase tightened

• Credit standards for loans to households for house purchase continued to tighten in the fourth quarter of 2020 (net percentage of 7%, after 20% in the third quarter; see Chart 5 and Overview table).
• 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 a tightening of credit standards and contributing factors)
• Banks continued to report a tightening contribution from other factors, such as macroprudential policies targeting housing credit in France (see Chart5 and Table5).
• Across the largest euro area countries, credit standards tightened in France, while they remained unchanged in Germany, Spain and Italy.
• Looking ahead, euro area banks expect a continued net tightening of credit standards for housing loans (a net percentage of 13%) in the first quarter of 2021.
• Table 5 Factors contributing to changes in credit standards for loans to households for house purchase (net percentages of banks)

2.2.2 Terms and conditions on loans to households for house purchase continued to tighten

• Banks overall terms and conditions continued to tighten for housing loans (net percentage of 6%, after 9% in the previous quarter).
• Chart 6 Changes in terms and conditions on loans to households for house purchase (net percentages of banks reporting a tightening of terms and conditions)


Table 6 Changes in terms and conditions on loans to households for house purchase (net percentages of banks)

• Higher risk perceptions and lower risk tolerance contributed to the net tightening of overall terms and conditions on housing loans.
• Across the largest euro area countries, overall terms and conditions on housing loans tightened in Germany and France, while there was no change in Spain and Italy.
• Table 7 Factors contributing to changes in overall terms and conditions on loans to households for house purchase (net percentages of banks)

2.2.3 Rejection rate for housing loans increased

• Overall, the net increases in rejection rates over the course of 2020 correspond well to the changes in credit standards.
• Across the largest euro area countries, the rejection rate for housing loans increased in France, Spain and, to a lesser extent, Germany, while it declined in Italy.
• Chart 7 Changes in the rejection rate for loans to households for house purchase (net percentages of banks reporting an increase in the share of rejections)

2.2.4 Net demand for housing loans continued to increase

• Banks continued to report a net increase in demand for housing loans in the fourth quarter, after a strong rebound in the previous quarter (net percentage of banks reporting an increase in loan demand of 16%, after 31% in the third quarter of 2020; see Chart 8 and Overview table).
• The continued net increase in housing loan demand likely reflects the fact that it is still catching up after the collapse in the second quarter and is consistent with the actual developments in mortgage lending flows observed in recent months.
• Across the largest euro area countries, banks in Germany and France reported a net increase in housing loan demand, while banks in Spain reported a net decline, and demand remained unchanged in Italy.
• In the first quarter of 2021, banks expect a small net decline in demand for housing loans (net percentage of -3%).
• Chart 8 Changes in demand for loans to households for house purchase, and contributing factors (net percentages of banks reporting an increase in demand and contributing factors)


Table 8 Factors contributing to changes in demand for loans to households for house purchase (net percentages of banks)

2.3 Consumer credit and other lending to households

2.3.1 Credit standards for consumer credit and other lending to households tightened

• Banks cost of funds and balance sheet situation had a broadly neutral impact on credit standards for consumer credit and other lending to households.
• Across the largest euro area countries, credit standards for consumer credit and other lending to households tightened in Spain and, to a lesser extent, in France, while they remained unchanged in Germany and eased in Italy.
• Looking ahead to the first quarter of 2021, euro area banks expect a continued net tightening of credit standards on consumer credit and other lending to households (5%).
• 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 a tightening of credit standards and contributing factors)


Table 9 Factors contributing to changes in credit standards for consumer credit and other lending to households (net percentages of banks)

2.3.2 Terms and conditions on consumer credit and other lending to households remained broadly unchanged

• In the fourth quarter of 2020, banks overall terms and conditions applied when granting new consumer credit and other lending to households remained broadly unchanged (net percentage of 1%, after 1% in the previous quarter).
• Chart 10 Changes in terms and conditions on consumer credit and other lending to households (net percentages of banks reporting a tightening of terms and conditions)


Table 10 Changes in terms and conditions on consumer credit and other lending to households (net percentages of banks)

• Banks cost of funds and balance sheet constraints had a broadly neutral impact (see Table11).
• Across the largest euro area countries, overall terms and conditions on consumer credit and other lending to households continued to tighten in Spain, while they eased in France and remained unchanged in Germany and Italy.
• Table 11 Factors contributing to changes in overall terms and conditions on consumer credit and other lending to households (net percentages of banks)

2.3.3 Rejection rate for consumer credit and other lending to households increased

• In the fourth quarter of 2020, banks indicated a net increase in the share of rejected loan applications for consumer credit and other lending to households (net percentage of 4%, after 16% in the previous survey round; see Chart 11).
• Across the largest euro area countries, the rejection rate increased in Spain and France, while it decreased in Germany and remained unchanged Italy.
• Chart 11 Changes in the rejection rate for consumer credit and other lending to households (net percentages of banks reporting an increase in the share of rejections)

2.3.4 Net demand for consumer credit and other lending to households declined

• In the fourth quarter of 2020, banks reported a net decline in demand for consumer credit and other lending to households (net percentage of banks standing at -9%, after a net increase of 3% in the previous quarter; see Chart 12 and Overview table).
• The net decline indicates that demand for consumer credit remains subdued due to the coronavirus pandemic after only a moderate recovery in the previous quarter, which followed the record decline in demand in the second quarter of 2020.
• Net demand for consumer credit is again below the historical average since 2003 (1%).
• Chart 12 Changes in demand for consumer credit and other lending to households, and contributing factors (net percentages of banks reporting an increase in demand and contributing factors)


Table 12 Factors contributing to changes in demand for consumer credit and other lending to households (net percentages of banks)

• Across the largest euro area countries, banks reported a net decline in demand for consumer credit.
• Lower consumer confidence contributed to the net decline in demand in all countries, while decreased spending on durable goods had a negative impact in Spain and France.
• In the first quarter of 2021, banks expect a net increase in demand for consumer credit and other lending to households (net percentage of 4%).

3 Ad hoc questions

3.1 Banks’ access to retail and wholesale funding

• The January 2021 survey included a question assessing the extent to which the situation in financial markets had affected banks access to retail and wholesale funding.
• In the fourth quarter of 2020, banks reported in net terms that their access to retail and wholesale funding continued to improve (see Chart 13 and Table 13).
• Banks continued to report an improvement in access to funding via short-term and long-term debt securities and to money markets, while access to securitisation improved only slightly.
• Regarding retail funding, access continued to improve for both short-term and long-term funding, albeit to a lesser extent than in the previous round.


Looking ahead to the first quarter of 2021, euro area banks expect that their access to retail and wholesale funding, except securitisation, will continue to improve, but to a lesser degree than in the fourth quarter of 2020. Table 13 Banks’ assessment of funding conditions and the ability to transfer credit risk off the balance sheet (net percentages of banks reporting a deterioration in market access)

3.2 Banks’ adjustment to regulatory and supervisory actions

• These new requirements cover regulatory or supervisory actions that have recently been implemented or that are expected to be implemented in the near future.
• In addition, banks indicated that regulatory or supervisory relief measures implemented in the context of the coronavirus pandemic had led to a significant increase in banks total assets, driven largely by liquid assets.
• At the same time, banks indicated that regulatory or supervisory action had had a strong easing impact on their funding conditions.
• Chart 14 Impact of regulatory or supervisory action on banks risk-weighted assets, capital and funding conditions (net percentages of banks)


Table 14 Impact of regulatory or supervisory action on banks’ risk-weighted assets, capital and funding conditions (net percentages)

• Looking ahead to 2021, euro area banks expect that regulatory or supervisory action will support their capital positions and will lead to an increase in their total assets, although to smaller extent than in 2020.
• In addition, they also expect regulatory or supervisory action to have a stronger tightening impact on credit standards for loans to enterprises and a smaller tightening impact on credit standards for consumer credit.
• Finally, banks expect that regulatory or supervisory action will have a widening impact on credit margins across all loan categories, except consumer credit.
• Chart 15 Contribution of regulatory or supervisory action to the tightening of banks credit standards and margins (net percentages of banks)


Table 15 Contribution of regulatory or supervisory action to the tightening of banks’ credit standards and margins (net percentages)

3.3 The impact of banks’ NPL ratios on their lending policies

• The January 2021 survey included a biannual ad hoc question about the impact that banks NPL ratios have on their lending policies and the factors through which NPL ratios contribute to changes in lending policies.
• The reported tightening impact of banks NPL ratios on banks lending conditions across all loan categories in the second half of 2020 was smaller than expected by banks in the July 2020 BLS.
• Chart 16 Impact of banks NPL ratios on credit standards and terms and conditions (net percentages of banks)


Chart 17 Contributions of factors through which NPL ratios affect banks’ policies on lending to enterprises and households (net percentages of banks)

• Other factors, such as costs related to capital position, balance sheet clean-up operations and pressure related to supervisory or regulatory requirements, also contributed to the tightening of bank lending conditions via NPL ratios.
• Banks liquidity position and access to market financing had a broadly neutral impact on lending conditions via NPL ratios.
• Over the next six months, euro area banks expect their NPL ratios to have a somewhat weaker net tightening impact on credit standards and on terms and conditions for loans to enterprises and consumer credit, but they expect a slightly stronger tightening impact for housing loans.

3.4 Bank lending conditions and loan demand across main sectors of economic activities

• Banks were asked to collect information covering the following sectors: manufacturing, construction (excluding real estate), services (excluding financial services and real estate), wholesale and retail trade, and real estate (including both real estate construction and real estate services) broken down into commercial and residential real estate.
• Banks overall terms and conditions tightened most strongly for new loans to firms in the real estate sector (14%), which was also driven by commercial real estate.
• Over the next six months, euro area banks expect a lower net tightening of credit standards and continued net tightening of overall terms and conditions for new loans to enterprises across all main economic sectors.
• Chart 18 Changes in credit standards for new loans to enterprises across main economic sectors (net percentage of banks; over the past and next six months)


Chart 19 Changes in terms and conditions for new loans to enterprises across main economic sectors (net percentage of banks; over the past and next six months)

• The net increase in demand was stronger for firms in the services and the wholesale and retail trade sectors, while demand increased only slightly in the manufacturing and construction sectors.
• Over the next six months, euro area banks expect that firms loan demand will increase in almost all economic sectors, except the real estate sector, where banks expect demand to remain broadly unchanged.
• Chart 20 Changes in demand for loans or credit lines to enterprises across main economic sectors (net percentages of banks)

3.5 The impact of government loan guarantees related to the coronavirus pandemic

• In addition, the question asked about the factors affecting demand for loans with COVID-19-related government guarantees.
• Euro area banks reported that COVID-19-related government guarantees were important in supporting banks credit standards for loans to firms in 2020 (see Chart 21).
• By contrast, credit standards for loans to enterprises without government guarantees tightened in 2020 (net percentage of 16% over the past six months, after 20% in the first half of 2020).
• Chart 21 Changes in credit standards for loans to enterprises with and without COVID-19-related government guarantees (net percentages of banks)


Chart 22 Changes in terms and conditions for loans to enterprises with and without COVID-19-related government guarantees (net percentages of banks)

• The net easing on loans with guarantees was stronger in the first half of the year than in the second half.
• The corresponding easing and tightening of banks terms and conditions was similar for loans to SMEs and to large enterprises.
• Over the next six months, banks expect their terms and conditions to continue to ease for loans with guarantees (-5%), while for loans without guarantees banks expect a slight tightening (2%).
• Over the next six months, banks expect an increase in demand for loans without government guarantees.
• Chart 23 Changes in demand for loans to enterprises with and without COVID-19-related government guarantees (net percentages of banks)
• Banks also reported that substitution of existing loans had a positive impact, while the need to finance fixed investment contributed negatively to firms loan demand in the first half of 2020.
• Banks expect that firms demand for loans or credit lines will also be driven by acute liquidity needs in the next six months, in the context of renewed coronavirus-related restrictions.
• Chart 24 Factors affecting the demand for loans or credit lines with COVID-19-related government guarantees (net percentages of banks)