The demand for corporate loans increased only slightly in the third quarter, after exceptionally large increases in the first two quarters. According to the National Bank, companies asked for loans primarily to maintain their solvency and operations. “The financing requirements for fixed investments, however, have collapsed.” State guarantees played an important role in the corona crisis. The banks tightened the conditions.
Government guarantees for corporate loans would have enabled banks to be less restrictive on lending than they would have to be without this support. The Eurosystem’s monetary policy and the guarantees ensured favorable financing conditions during the Covid-19 pandemic, according to the Oesterreichische Nationalbank (OeNB) on Friday in a press release on the Austria results of the euro-area survey on the lending business. However, the demand for guarantee volumes in Austria also fell significantly over the summer.
The banks emphasized that repayments must also be ensured with guarantees and had therefore tightened the credit conditions for new loans since the first quarter. In the first nine months, for example, the margins were continuously increased, especially for riskier loans. The banks have also recently become stricter in other areas, such as collateral. In the third quarter, the credit guidelines – the bank’s internal criteria for granting – were tightened. The banks justify this primarily with a changed risk assessment and their risk tolerance.
On the other hand, the effects of the Covid 19 pandemic on loans for private households were less, according to the OeNB. Due to the changed risk situation, the banks tightened their supply policy mainly in the second quarter. The demand for housing loans increased again somewhat in the third quarter compared to the second quarter. The demand for consumer and other credit remained largely unchanged in the period from July to September. There was a significant decline in the second quarter, mainly due to lower consumer confidence and lower spending on durable goods.
In the second half of September, banks were also asked about the impact of the Eurosystem’s monetary policy measures. The targeted, longer-term refinancing transactions were very well received and had a positive effect on their financial situation. The funds available in this way would also be used – in accordance with the objectives – for lending. The securities purchase programs would have positive effects on the liquidity and financing conditions of Austrian banks, but would have negative effects on their earnings position.
The negative interest rate on the ECB deposit facility is also putting a strain on the earnings position, but this will be reduced by the two-tier system introduced in autumn 2019 for the interest on excess liquidity. According to the OeNB, the negative interest rate of the ECB deposit facility has a beneficial effect on the financing conditions of companies and households via lower lending rates. The survey was carried out in the second half of September.
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