Tighter credit standards – Norges Bank’s Survey of Bank Lending 2007 Q4
Norges Bank is today presenting the results of its first Survey of Bank Lending. The banks in the survey reported some tightening of credit standards for loans to non-financial corporations and marginal tightening of credit standards for loans to households in 2007 Q4. Further tightening of credit standards for loans to non-financial corporations, particularly in the commercial real estate sector, is expected in 2008 Q1. The survey suggests that tightening of credit standards for loans to households may be fairly slight in 2008 Q1. The survey will be conducted on a quarterly basis.
Changes in the economic outlook and banks’ appetite for risk contributed to tighter credit standards for loans to households in 2007 Q4. Banks increased their lending margins for loans to households and reduced maximum loan-to-value ratios.
The factors contributing most to tighter credit standards for loans to non-financial corporations in 2007 Q4 were funding conditions, the sector-specific outlook, the economic outlook and banks’ appetite for risk. Tighter credit standards were primarily implemented by increasing equity requirements and lending margins.
Objective of the Bank Lending Survey
- The main objective of the survey is to provide qualitative information about the demand for and supply of new loans and the terms and conditions applied. This information is not currently covered by other types of statistics, says Director Birger Vikøren. The survey may indicate whether changes in credit growth are due to changes in the demand for or supply of credit. Furthermore, it may provide information about changes in banks’ perception of risk and in their loan terms and conditions. In addition to information on risk pricing, the survey may also shed light on non-price loan terms and conditions, such as interest-only periods, maturities, loan-to-value ratios, bank commissions and fees etc.
Scope of the Bank Lending Survey
The Bank Lending Survey covers two main areas – lending to households and lending to non-financial corporations. The banks are asked to assess developments in the past quarter and expected developments in the next quarter.
The survey is based on information from the eight largest financial institutions ranked according to the annual change in lending to households and to non-financial corporations. It covers around 60 per cent of loans to households from all financial institutions. For non-financial corporations, the survey covers around 80 per cent of loans to non-financial corporations.
Norges Bank's Survey of Bank Lending 2007 Q4 (pdf, 121 kB)
Data from Norges Bank's Survey of Bank Lending (xls, 29 kB)
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