“Eurozone avoids credit crunch”. Phew. Thank God. Nothing to worry about now. Oh wait.
Seriously, though. It’s interesting that the Eurozone has avoided a slowdown in lending, though as the FT explains, the reason may be because banks unable to shift loans off-balance sheet seem like they’ve got bigger loan book. Even then, though, could be good news:
Mr Papademos added that there was “no sign of a credit crunch”, while tighter credit standards applied by banks had “taken place from a very ‘loose’ level and had not significantly constrained the availability of credit”.
The strength of eurozone lending to businesses since the start of the global financial market crisis last August has surprised analysts. One explanation is that companies that would previously have raised funds from capital markets were relying more on traditional bank lending.
But Gilles Moec at Bank of America argued that it was a good sign that banks were prepared to respond to such demand for “vanilla” lending. The fact that companies were sticking to investment and expansion plans was “one of the most reassuring features that we see at the moment” and marked a clear difference to conditions ahead of the 2001 economic downturn.
Another explanation is that banks’ difficulties in selling-on loans and removing them from their balance sheets could have exaggerated the rate of loan growth. But in its monthly bulletin this month the ECB said the fact that strong growth was seen in lending to the nonfinancial sector and at long maturities suggested “business as usual by borrowers”.
I’ve heard anecdotal evidence of a slowdown in lending and small business owners in Ireland finding it harder to get credit, but the macro money supply number looks better than a lot of people would have suspected, as the loan book for Ulster Bank certainly looks healthy.
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