Credit con­trac­tion con­tin­ues

De­mand for loans has de­clined 90 per­cent since the out­break of the cri­sis, while banks are very cau­tious

Kathimerini English - - Focus - BY YIANNIS PAPADOYIANNIS

De­mand for new loans has vir­tu­ally ground to a stand­still owing to the con­tin­ued stag­na­tion of the Greek econ­omy which has re­sulted from the un­cer­tainty gen­er­ated by the end­less ne­go­ti­a­tions with the coun­try’s cred­i­tors and de­lays in the im­ple­men­ta­tion of re­forms.

In Fe­bru­ary the an­nual rate of to­tal fi­nanc­ing of the pri­vate sec­tor came to a neg­a­tive 1.6 per­cent, with loan re­pay­ments out­weigh­ing new loan is­sues by 101 mil­lion eu­ros. In Jan­uary the credit con­trac­tion had amounted to 885 mil­lion eu­ros. This neg­a­tive pic­ture is known to have con­tin­ued in March, while banks are ex­pect­ing a more pos­i­tive per­for­mance in the lat­ter half of the year, pro­vided of course that the gov­ern­ment com­pletes the sec­ond bailout re­view in May.

Bank of­fi­cials say that be­sides the ma­jor liq­uid­ity prob­lems forc­ing banks to be ex­tremely cau­tious with the is­sue of new loans, there is also a ma­jor de­cline in de­mand. Hel­lenic Bank As­so­ci­a­tion fig­ures show that the drop in de­mand by house­holds has reached up to 90 per­cent com­pared to the pe­riod be­fore the out­break of the fi­nan­cial cri­sis.

It is quite telling that last year banks re­ceived an av­er­age of 82 mort­gage ap­pli­ca­tions per work­ing day against 1,182 ap­pli­ca­tions be­fore the cri­sis, in 2007. This con­sti­tutes a re­duc­tion of 93 per­cent. Sim­i­larly, the av­er­age daily vol­ume of ap­pli­ca­tions for con­sumer loans reached 4,455 in 2016 against 32,273 in 2007, amount­ing to an 86 per­cent re­duc­tion.

Banks re­port that most house­holds which still have high in­comes do not wish to bor­row due to the un­cer­tainty and over­tax­a­tion, while de­mand mostly de­rives from 683.57 1.0630 house­holds with fi­nan­cial prob­lems that are not deemed sol­vent.

The sit­u­a­tion is even more prob­lem­atic when it comes to cor­po­rate loans, as de­mand from healthy en­ter­prises is close to zero. This pic­ture is clearly re­flected in ICAP data, ac­cord­ing to which the rate of cor­po­ra­tions on high credit risk and with sus­tain­abil­ity prob­lems has risen more than ten­fold in eight years, from 6 per­cent in 2009 to 63 per­cent to­day.

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