Regulation / banks

Economic slowdown reaches banks‘ lending business in Germany

The economic slowdown in Germany has now also reached the lending business. The extremely dynamic growth of banks‘ customer loans has slowed recently. From the end of September 2018 to the end of September 2019, loans to companies, private households and the state rose by 4.0 percent to EUR 2,928.2 billion. The strongest growth was again recorded in corporate loans. However, the increase slowed compared to the middle of the year. On the other hand, growth in private housing loans remained stable at a high level. The economic environment, which is characterised by a weakening industry, but a persistently good construction sector, is also reflected in the expectations of banks for the coming months. Most of them expect demand for corporate loans to fall and are planning to tighten their credit guidelines for these customers. The banks are more optimistic about the demand for credit from private households, for whom…

Central banks need relief

At the latest since the ECB’s latest loosening package in September, the limits of monetary policy have been the subject of renewed discussion. Because the lower interest rates slide into the red, the more questionable the positive real effects on the economy that the central bank expects them to have. At the same time, the risks to financial stability are increasing, whether due to excessive indebtedness or price exaggerations on the stock, bond or real estate markets. But the financial markets have long since adjusted to the overabundant supply of liquidity. The hunt for returns leads to increasingly risky investments. And an excessive indebtedness does not seem to represent a large risk with a zero or negative interest rate first of all. This makes it all the more difficult for central banks to get out of low interest rates. In order to make their task easier for the central banks,…

World Savings Day 2019: „More than money and interest“.

World Savings Day boomed in Germany in the 1970s and 1980s, when millions of customers and their children went on pilgrimages to the banks every year to empty piggybanks, invest money and enjoy the growth of financial assets. Today, on the other hand, there is more frustration when it comes to saving. It is the continuing low interest rate phase that is to blame. For some time now, the meagre interest income has no longer been sufficient to at least offset inflation. Negative real returns are the order of the day and cause a loss in value of financial assets in the billions. In this environment, many bank customers ask themselves whether saving makes sense at all. In fact, however, there is ample need for regular savings. After all, the demographic change in our society is making the „generation contract“, on which the statutory pension is based, function worse and…

Bank Lending Survey: German banks fear falling demand for corporate loans

ank Lending Survey: German banks fear falling demand for corporate loans The economic slowdown in Germany is noticeably reflected in the results of the ECB’s current bank survey. For the first time in five years, the majority of German banks expect corporate customers‘ demand for credit to decline in the coming months. Large companies in particular are expected to have a lower demand for credit. At the same time, a slight majority of banks are planning to tighten their lending guidelines for corporate customers. The credit providers are thus reacting to the current slowdown in economic growth, which is particularly affecting export-driven companies in the manufacturing sector. As the October survey continues to show, private housing loans, on the other hand, should contribute to stabilizing the credit market. The majority of banks believe that demand for credit will continue to grow, and institutions intend to relax their credit guidelines rather…

Money for nothing…

Who doesn’t know the Dire Straits song „Money For Nothing“? Reality even caught up with us. For debts there is even money back today. In this logic, debts have become an asset and no longer a burden. This of course reverses many laws in the real economy and the financial markets. In the US, companies with new debts are buying back shares because they expect financing advantages in view of the low interest rates for corporate bonds. In Germany, you can soon get real estate loans for free. Low interest rates are of course also a reason for rising house prices. However, the favourable interest rate environment does not mean that the road to home ownership has in principle become easier and more affordable. Rather, the challenges have changed. The hurdle that households have to overcome today when buying their own home is no longer the viable monthly burden. Since…

US Federal Reserve leaves everything open, but interest rates should fall

Many market participants hoped for further information from the central bank conference in Jackson Hole as to whether the latest adjustment in the middle of the economic cycle would not develop into a full-blown key rate reduction cycle after all. Fed Chairman Powell, however, did not want to commit himself and gave no concrete indications of the future path of monetary policy. On the other hand, he was open to the idea that there was no manual for dealing with the current trade conflict. This in turn points to a high degree of uncertainty in the FOMC itself. In my view, it is relatively certain that key US interest rates will continue to fall in the course of the year. The exciting question, however, is whether further rate cuts will have a positive effect on the real economy at all, or only boost the financial markets. Political pressure on the…

1 2 10