Banks expect lending standards to ease

TIRANA, May 7 – With non-performing loans standing at a record 24 percent, banks continue applying tight lending standards for both businesses and households. Banks expect lending standards to ease both for households and businesses in the second quarter of 2014 after keeping them tight in the first quarter of the year, according to a quarterly survey by the Bank of Albania.
“Expectations for the second quarter of 2014 show lending standards will ease, especially for households both for home purchases and to finance consumption. Lending standards for businesses will ease mainly to finance floating capital and to a lower degree to finance investments,” says the report.
For the first quarter of 2014, banks tightened standards for lending to businesses and slightly eased them for households. Banks continue reporting a decline in demand for new loans by businesses and a moderate increase for households.
Bankers say the main factors leading to a decrease in demand for new loans is the current and expected macroeconomic situation and a decline in the need to finance investments.
Specific problems of the sector where businesses operate, the situation with bad loans and the country’s macroeconomic situation were some of the factors which further tightened lending standards for businesses, said the survey.
Perceiving rising risk in loans, banks have shifted into investments in government securities, whose yields have sharply dropped positively reflecting the central bank’s monetary policy and lowering the costs of Albania’s public debt. Yields on 12-month T-bills which are the key instrument of government’s domestic debt have dropped to 3.5 percent down from 6.6 percent in early 2013.