The Wilder View

The worst of the credit crisis is likely behind us, say key central banks

Together, global senior loan officer surveys tell the following story: the worst of the credit crunch is likely behind us. Key central banks – the Bank of Canada (BoC), the Bank of England (BoE), and the European Central Bank (ECB) – report that Q1 2009 credit conditions are generally tightening; however signs of stabilization are emerging: fewer banks are reporting to have tightened. The Bank of Japan (BoJ) reports that credit standards are generally easing somewhat; however, the demand for lending is likely the limiting factor for credit flow in Japan.

The ECB: showing signs of stabilization for household and firm lending


From the ECB’s survey report:

The results of the April 2009 bank lending survey show that in the first quarter of 2009 the net percentage of banks reporting a tightening of credit standards on loans and credit lines to enterprises was 43%, which – while still reflecting a pronounced further net tightening – was 21 percentage points lower than in the fourth quarter of 2008. This could point to some stabilisation of the current tightening cycle. For the second quarter of 2009, the banks expect a further reduction of the overall net tightening to 28%.

The BoC: Lending standards still tight, but less widespread


From the BoC’s survey report:

Although overall lending conditions continued to tighten, the tightening was somewhat less widespread than in the preceding quarter.

The BoE: Seeing some light, overall standards on corporate lending actually eased…


From the BoE’s survey report:

In the three months to mid-March, a net balance of lenders reported that they had reduced the availability of credit to households. Contrary to expectations expressed in the 2008 Q4 survey, a small net balance of lenders reported increased lending to the corporate sector over the past three months. As in previous surveys, concerns about the economic outlook, reduced appetite for risk and falling collateral values had borne down on credit availability.

And the BoJ: Easing somewhat across most loan types


The BoJ’s survey report indicates that in the first quarter of 2009 net, lending standards to large firms tightened somewhat, while those to medium-sized firms eased somewhat. Small firm and household lending standards eased somewhat. However, the outlook for small firm and household loans suggests that less easing is on the horizon. Note: the BoJ information can be found in question 7. of the survey.

In Japan, the primary problem in the bank lending space – the limiting factor according to the survey – is not the standards, but the weakening demand for loans (see question 1 of the survey and my previous post).

Overall, standards remain tight and are tightening in net across key economies; however, the survey results suggest that further tightening is becoming less widespread. I imagine that the worst of the global credit crunch is now behind us. The Fed’s senior loan officer survey report for Q1 2009 will release soon; and I expect it to tell a similar story.

Originally published at the News N Economics blog and reproduced here with the author’s permission.

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