Lending to non-financial corporations

The National Bank of Romania has published in February the Bank Lending Survey. The survey shows that in the final quarter of 2017, credit institutions preserved their credit standards on loans for house and land purchase to households and tightened marginally those for consumer credit. As for non-financial corporations, lending conditions applicable to them stayed flat against the previous quarter. For the first quarter of 2018, credit institutions envisage a marginal tightening of credit standards for both housing loans and consumer credit. Conversely, credit standards applicable to non-financial corporations are anticipated to hold steady in 2018 Q1 as well.

Credit standards for companies held steady from the previous quarter. This stagnation was manifest regardless of loan maturity or company size. For the upcoming quarter, respondents expect credit standards to remain unchanged.

In the euro area, credit standards for enterprises remained unchanged in 2017 Q4, in line with expectations. In terms of company size, credit standards for small and medium-sized enterprises stayed put, while those for large companies were eased slightly. Among the factors that helped ease credit standards were the competitive pressure and banks’ risk perceptions, whereas the cost of funds and balance sheet constraints and banks’ risk tolerance had a neutral impact. For the first quarter of 2018, euro area banks anticipate credit standards for enterprises to ease.

Credit terms and conditions

On the whole, credit terms and conditions for loans to non-financial corporations saw no notable changes in 2017 Q4, except for the spread between the average lending rate and 1M ROBOR, whose decrease shows a moderate easing.

Loan demand

Contrary to expectations, loan demand from non-financial corporations remained unchanged at aggregate level in 2017 Q4 versus the previous quarter.

Nevertheless, the breakdown shows that demand for long-term loans to large companies advanced moderately and that for loans to small and medium-sized enterprises rose marginally, regardless of loan maturity. Against this background, demand for corporate loans still exerts pressure that banks should address accordingly, by broadening the access to financing for more companies. According to banks, corporate demand is expected to further expand moderately over the upcoming quarter at aggregate level, but also on every segment, especially as regards large companies.

Credit risk associated with lending to non-financial corporations

According to respondents, credit risk with respect to non-financial corporations experienced no considerable changes in 2017 Q4 overall. However, the breakdown by business sector is indicative of some fluctuations, such as a significant increase in risk associated with construction, while risk for the companies operating in energy and tourism was seen as moderately higher than in the quarter before. Banks consider that credit risk remained flat for all categories of enterprises, regardless of their size, in 2017 Q4 versus 2017 Q3.

The loss given default (LGD ) at aggregate level remained relatively unchanged at 42 percent. Nevertheless, the breakdown by sector shows some fluctuations, with LGD posting a rise in mining and slightly lower values in the construction and real-estate sub-sectors than in the previous three-month period.

For further information: NBR – Bank Lending Survey