The German Bundesbank published the latest Germany Bank Lending Survey results, showing that banks tightened internal credit standards in the fourth quarter of 2024 for corporate loans, housing loans to households, and consumer and other household lending, citing lower risk tolerance and higher perceived credit risk. Over the same period, reported loan demand increased in all segments, with the strongest rise in private housing finance. On net, the share of banks tightening credit standards was +13% for corporate loans (after -3% in the previous quarter), +11% for housing loans (after +7%), and +11% for consumer and other household loans (after +15%). While standards tightened in all segments, lending terms and conditions became more restrictive for corporates, including wider margins independent of borrower creditworthiness, smaller average loan size, higher collateral requirements and stricter covenants, while housing loan conditions eased overall due to lower interest rates and lower creditworthiness-independent margins; consumer loan conditions were unchanged on balance. Rejection rates rose again, especially for small and medium-sized enterprises, and also increased for consumer and other household loans, while remaining unchanged for housing finance. Tightening in corporate lending over the past six months was strongest for energy-intensive manufacturing, construction (excluding real estate) and the real estate sector, and banks reported that non-performing loan ratios and other credit quality indicators had a restrictive effect on corporate and consumer lending policies; excess liquidity held with the Eurosystem was reported to have had no impact on lending. Looking ahead, banks planned further tightening of credit standards in the first quarter of 2025 and expected broader regulatory and supervisory requirements over the next 12 months, particularly implementation of the Basel III reform package’s revised rules for determining risk-weighted assets, to raise risk-weighted assets and necessitate additional tightening across all credit segments. They also anticipated unchanged corporate loan demand in the first quarter of 2025, alongside further increases in household demand, especially for residential real estate finance.
German Bundesbank 2025-01-28
German Bundesbank survey finds German banks tightened lending standards across all credit segments and expect Basel III reforms to drive further tightening
The German Bundesbank's latest survey shows banks tightened credit standards in Q4 2024 for corporate, housing, and consumer loans due to lower risk tolerance and higher perceived credit risk, despite increased loan demand. Corporate lending terms became more restrictive, while housing loan conditions eased due to lower interest rates. Banks plan further tightening in Q1 2025, anticipating regulatory impacts from Basel III reforms on risk-weighted assets.