Credit for Business – Credit for companies – Business Loans
September 23, 2019
The credit terms for companies and consumers in Germany improved in the second quarter of 2017, according to the presentation of the bank in its current quarterly report. A reduction in bank margins will facilitate lending for demand. Especially the margin adjustments have changed the credit policy of the institutions.
According to Dundes Bank, the other credit standards have remained “almost constant” in both the private customer (consumer) and corporate customer business. Profit margins were lowered for both average creditworthiness and riskier credit requirements. Lending increased, especially in the financing needs of small and medium-sized enterprises and in the consumer credit sector.
Financing of private real estate and the demand for loans
On the other hand, both the financing of private real estate and the demand for loans from large companies have been slightly lower. The margin level in the banking business is essentially determined by the refinancing conditions of the banks. As part of the overall situation on the capital markets, German banks recorded a slight improvement in the refinancing situation compared to the previous month. However, there is another important factor in lending pricing: the regulatory and supervisory responsibilities of credit institutions have an impact on institutions’ spending. Pricing does not take into account lending.
The funds raised by the banks were, as the Dundes Bank continues to report, used primarily for loans in the context of monetary policy measures. The improved financial situation of the banks thus led to a better overall situation for the debtors, especially in the environment of the medium-sized companies in demand. In addition, the competitive situation of credit institutions is also an engine for reducing profit margins.
Because only those who are low on interest rates when lending in view of the favorable amount of money, can survive in this intensified competitive situation. How does the situation in Germany fit into the general European situation within the currency union? According to this EB’s Survey on the dollar area, the granting of business loans in the context of lending has been simplified.
Corporate bank lending
Compared to the previous quarter, corporate bank lending standards eased, despite a slight worsening in the previous quarter following the survey. Especially on the European side, the competitive situation is a driving force behind this development. No wonder then that real estate loans are easier to obtain for private households and consumer loans.
Conclusion: The conditions for new lending were relaxed in all credit categories. In Germany, as in the whole of the European Union, this has been achieved by reducing profit margins across all types of loans. According to the EB, demand for loans in the second quarter of 2017 will be driven mainly by acquisitions, but also by increased investment.
Also for real estate loans, the generally low interest rate level was a natural factor, which became a driving force for the lending market in Europe and Germany.