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-DNB-Banks continue to tighten credit standards for SMEs.

Global Banking News-May 24, 2013--DNB-Banks continue to tighten credit standards for SMEs(C)2013 ENPublishing - http://www.enpublishing.co.uk

ENP Newswire - 24 May 2013

Release date- 22052013 - Half the banks in the Netherlands continued to tighten their credit standards for loans to small and medium-sized enterprises (SMEs) in the first quarter of 2013.

The main reasons underlying their tightening stance are the increased risks that the banks perceive and the costs related to their capitalisation. At the same time a vast majority of banks (83%) reported a drop in credit demand from SMEs.

Credit standards for corporate loans

Credit standards for corporate loans were tightened further in the first quarter of 2013. This mostly concerned loans to SMEs. Whereas only a few banks tightened credit standards for loans to large enterprises, more than 50% of them decided to toughen the standards for small and medium-sized companies. (Chart 1).

Some 30% of banks in the Netherlands expect to continue tightening their credit standards for corporate loans, especially loans to SMEs.

Risk perception and capitalisation of banks

Two factors in particular contributed to the tightening of credit standards. Two-thirds of the banks reported increased risk perception with respect to corporate lending to SMEs in the first quarter of 2013. This concerns risks relating to general economic activity, the outlook for the industry or company in question, and the risks attached to the required collateral. In addition to this, 50% of the banks reported that the costs related to their capitalisation prompted them to tighten their credit standards to SMEs (Chart 2).

Demand for corporate loans

By their own report, banks perceived a decline in total demand for corporate loans in the first quarter of 2013. Declines were particularly visible in loans to SMEs (Chart 3). According to the banks, the drop in demand was caused by the decreasing financing requirement for both fixed investments and funding needed for mergers and acquisitions and restructuring operations. One third of the banks expects that demand for corporate loans will continue to decline in the second quarter.

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Publication:Global Banking News (GBN)
Date:May 24, 2013
Words:363
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