Demand for credit stagnant

Demand for new corporate and mortgage loans remained stagnant in the second quarter of the year, Bank of Greece data showed on Tuesday, as negative estimates about the financial state of businesses and households are keeping investment initiatives to a minimum.

Prospects for the second half of the year have been far from encouraging, as this is the period when tax payments come due for taxpayers and companies, so demand for new loans remained negative in the second quarter and is expected to be unchanged in the third quarter of the year.

The survey is conducted across the eurozone by national central banks in cooperation with the European Central Bank, and national results show that demand for financing is growing, partly thanks to the ECB’s policy for bolstering liquidity conditions across the euro area.

Greece is the exception, however, as according to BoG data the credit issue criteria remained very strict in the second half of the year and the ratio of applications to rejected corporate loans remained unchanged from the first quarter. Demand for mortgage or consumer loans remained low and the ratio of applications to rejected household loans was also unchanged from Q1.

The country’s commercial banks report that a lack of confidence and uncertainty have been the main factors hampering investment activity from the side of the enterprises.

The spreads for new corporate loans remain high and the average cost of borrowing ranges between 4 and 5 percent for large enterprises, and between 8 and 10 percent for small and medium-sized enterprises.

For the funding of SMEs banks draw a significant part of liquidity from the European Investment Bank and the European Bank for Reconstruction and Development, either via direct financing or collaterals. This usually secures lower interest rates, which sources say reduce the cost for enterprises from 200 to 400 basis points.