APA ots news: COVID loan aid for companies is working – but banks expect payment difficulties when the aid measures expire
Austria results of the euro-area survey on the lending business from January 2021 (Bank Lending Survey)
Vienna (APA-ots) – The COVID relief measures granted with the participation of the banks (loans with state guarantees, credit moratoriums) have worked well, but are currently concealing many difficulties. The real economic effects of the crisis are only just beginning to show. From a current point of view, this applies above all to companies that had problems before the crisis began, and to small companies. These are the results of the quarterly survey of the lending business, in which leading banks in the euro area and thus also in Austria are asked for their assessments. The survey was conducted in December 2020.
Lending business with companies in 2020 shaped by COVID aid
Government guarantees for corporate loans were one of the main public sector COVID relief measures in 2020. Demand for loans with state guarantees was particularly high in the first half of 2020. Then it decreased significantly. The banks consider federal guarantees to be a useful and necessary instrument to contain the economic consequences of the COVID-19 pandemic. Credit moratoriums (statutory deferrals of loan installments and those granted voluntarily by banks) were and are an important bridging aid for companies. In the second half of 2020 there was a significant decline in the moratoria from the high of EUR 30.6 billion to EUR 14.1 billion at the end of the year.
According to statements from the banks, the COVID relief measures have worked well, but are currently also hiding many difficulties. The real economic effects of the crisis are only just beginning to show. From a current point of view, this applies above all to companies that had problems before the crisis began, and to small companies. The location of large companies, on the other hand, is rated better. The banks also emphasize the different ways that industries are affected.
With its monetary policy, the Eurosystem supports coping with and recovery from the crisis by providing banks with extensive liquidity on good terms and creating favorable financing conditions for companies. The general level of interest rates is historically low.
In 2020, the risk situation will lead to a more cautious supply policy by banks in the lending business with companies
The banks surveyed tightened the guidelines for corporate loans somewhat in the second half of 2020. Credit guidelines are the banks’ internal criteria for lending. Overall, the government loan guarantees have prevented earlier and more stringent tightening of the guidelines.
The credit conditions for corporate loans have been tightened since the first quarter of 2020. Credit terms are the specific terms of the credit agreement (margins, ancillary costs, requirements for collateral, etc.). The margins (interest surcharges on reference interest rates) for corporate loans have been continuously increased – especially those for riskier loans. Other credit conditions were also continuously tightened in 2020.
According to the banks surveyed, demand for corporate loans fell in the fourth quarter of 2020. This was justified with a decrease in the financing requirement for fixed investments and increased internal financing. The banks participating in the survey already reported a steady decline in the financing requirements for fixed investments for the first three quarters of 2020. The high liquidity requirements of companies to maintain their solvency and their operations as a result of the crisis, however, caused credit demand to rise in the first three quarters – particularly strongly in the first two quarters.
Increased demand for residential construction loans from households in 2020
According to the assessments of the banks surveyed, the demand for residential construction loans has risen almost continuously since the third quarter of 2019. The low interest rate level was cited as the reason for this expansionary development. By contrast, demand for consumer and other loans to private households collapsed in the second quarter of 2020. This cut was justified with decreased consumer confidence and lower spending on durable goods (cars, furniture, etc.). At EUR 0.8 billion, significantly fewer new consumer loans were granted in the second quarter of 2020 than in the previous year (EUR 1.1 billion). On the supply side, credit guidelines and terms and conditions were tightened in 2020 due to the risk situation in the banks’ lending business with private households. In the fourth quarter of 2020, the margins for average home loans increased.
The central banks of the euro area – in Austria the Oesterreichische Nationalbank (OeNB) – together with the European Central Bank (ECB) have been conducting a survey four times a year since the beginning of 2003 on the lending business in the euro area in order to assess their level of information about the lending behavior of banks and the loan demand of companies and households, as well as other monetary policy issues. Most recently, 143 leading banks from all countries of the euro area were surveyed, including eight institutes from Austria.
A detailed presentation of the Austrian results will be published in Statistics – Data & Analyzes Q1 / 2021 and in advance on the OeNB website. There you will also find further information and data on the Austria results of the survey. https://www.oenb.at/Geldpolitik/Erhebungen/umfrage-ueber-das-kreditge schaeft.html
The results for the euro area can be found on the ECB website: https://www.ecb.europa.eu/stats/ecb_surveys/bank_lending_survey/html/ index.en.html
Further inquiry: Oesterreichische Nationalbank Dr. Christian Gutlederer Press Officer (+ 43-1) 404 20-6900 [email protected] www.oenb.at
Digital press kit: http://www.ots.at/pressemappe/156/aom
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OTS0047 2021-02-03/10:00
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