What information does the euro area bank lending survey provide on future loan developments?

Petra Köhler-Ulbrich and Franziska Hünnekes

Economic Bulletin Boxes, 2023, vol. 8

Abstract: This box examines the information that the euro area bank lending survey (BLS) provides on future growth in loans to firms and households for house purchase in the euro area. The survey has proved to be invaluable for assessing the passthrough of monetary policy to borrowers via banks, for obtaining early information on turning points in lending conditions, and for understanding changes in loan demand and lending conditions during exceptional periods, such as the COVID-19 (coronavirus) pandemic and the Russian war in Ukraine. First, simple cross-correlations reveal a strong relation between BLS indicators and actual loan growth several quarters ahead. Second, BLS indicators help improve loan forecasts. In terms of loans to firms, the credit standards and loan demand reported in the BLS provide additional information that can be used when forecasting lending, while for housing loans, forecasts are improved by taking into account reported demand in particular. Finally, bank-level data confirm that BLS responses also reveal information on loan developments at the individual bank level. Overall, recent developments regarding BLS credit standards and loan demand point to a deceleration of growth in loans to firms and households in the coming quarters. JEL Classification: E4, E44, E5, E52, G21

Keywords: Bank lending conditions; banks; credit; lending rates; loan demand; monetary policy transmission (search for similar items in EconPapers)
Date: 2023-01
Note: 2110208
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