Budapest, 30 May 2013 - The Magyar Nemzeti Bank publishes its first ‘Trends in Lending’, a quarterly publication that presents a comprehensive and descriptive analysis of lending indicators and trends previously published in separate documents. Another purpose of the publication will be to monitor the operation of the Bank’s Funding for Growth Scheme.
Corporate loans outstanding continued to shrink in 2013 Q1, declining by 6.3 per cent on a year-on-year basis. According to banks’ responses, there has been no material change in the tight corporate non-price credit conditions, and, looking ahead, no shift is expected either. However, price conditions have improved in parallel with the Bank’s interest rate cuts, resulting in a 8 per cent decline in interest rates on forint-denominated corporate loans in the first quarter. Overall, only a limited number of companies have access to credit, but they benefit from the more favourable lending rates.
Tight credit supply constraints have affected the segment of micro, small and medium-sized enterprises particularly severely, requiring central bank intervention. The Funding for Growth Scheme (FGS) of the Magyar Nemzeti Bank starting in June is expected to lead to a marked easing in credit conditions (price terms on loans) through interest-free central bank refinancing and a maximum spread of 2.5 percentage points. Decreasing interest burdens will improve corporate creditworthiness and reduce banks’ credit risks, with the result that non-price terms on lending may ease as well. Thus, Funding for Lending Scheme may result in a turnaround in lending to SMEs.
Loans outstanding continued to contract in the household segment, by 5 per cent on a year-on-year basis. According to banks’ responses, the easing in household credit conditions remains unbroken in the case of both housing and consumer loans; and further adjustment has taken place and can be expected following the broad-based tightening carried out at the end of 2011. In addition, however, banks indicated weakening demand for lending. Within new loans extended, only the annual percentage rate of charge (APR) on housing loans tracked the policy rate cuts. The interest rate spread on new lending remains above 5 per cent, which is also reflected in the historically low new loan volumes.
The objective of the publication Trends in Lending is to present a detailed picture of the latest trends in lending and to facilitate the appropriate interpretation of these developments. To this end, it elaborates on the developments in credit aggregates, the demand for loans perceived by banks and credit conditions, based on the Lending Survey, balance sheet and interest rate statistics of the banking system.