Banks tighten squeeze on firms, consumers and home buyers
Published 29/04/2010 | 05:00
BANKS demanded bigger deposits and better security from housebuyers in the first three months of the year, as the credit squeeze continued to tighten. Banks also charged more for consumer credit.
Companies faced higher interest rates for loans and more restrictive requirements on the security they provide, according to the latest survey of the banks.
The survey -- which is part of a regular exercise carried out across Europe by the European Central Bank -- found that Irish banks became more cautious on lending, as they have done each quarter since the crisis began.
The banks claim there is no shortage of credit, but their own responses to the surveys tend to support the claims of businesses that credit is harder to get -- and more expensive. The banks said they tightened credit standards to businesses due to the higher cost of deposits and their own borrowing, and the perception of higher risk among firms looking for loans.
The tightening of lending to households was blamed on increased risk perception, which probably represents job insecurity among applicants.
The survey also found that demand for loans among businesses and consumers fell in the first quarter. It suggests the decline in loan demand from companies is set to continue during the second quarter of the year, while banks expect the demand for household loans to remain unchanged.
The one bright spot is that credit standards on loans to households are expected to ease for both house purchases and consumer credit during the three months from April-June.