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PRESS RELEASE April 7, 2011
Survey on Bank Lending Practices
(Changes in Q1 2011 and Prospects for Q2 2011)
□ In the second quarter of 2011, the easing trend in domestic banks' lending attitudes is forecast to strengthen, centering mainly on their loans to small and medium-sized enterprises (SMEs) and general household loans.
― Regarding loans to SMEs, banks expect to ease their lending standards considerably, due to the absence of suitable
investment alternatives.
― As to general household loans, banks' lending attitudes are also expected to ease significantly, owing largely to the competition among them to expand their retail banking; and on housing loans, they expect to maintain their eased lending standards despite the reimposition of DTI (debt-to-income) regulations.
□ Credit risks, mainly of loans to SMEs and households, are expected to increase further.
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― In the case of SMEs, their credit risk is foreseen increasing due mainly to the deterioration in their business conditions as a result for example of the rises in international commodity prices and to the continued downturn in real estate activity.
― The credit risk of households is also forecast to expand
greatly, due primarily to the weakening of their debt servicing capacities caused by the rise in the interest rates on
household loans.
□ Demand for loans is forecast to remain at a high level led by demand from SMEs.
― Demand at SMEs is expected to increase, as they look to secure excess funds in provision for uncertain business conditions, while demand at large firms will remain low.
― Meanwhile, whereas the demand for general household loans is forecast to increase centering around fund for living
expenses, demand for housing loans is expected to decline on a large scale, owing for example to the reimposition of DTI regulations and the rise in interest rates.
Changes in Domestic Bank Lending Behavior Diffusion Index (DI1))
2008 2009 2010 2011
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2e Lending attitude -11 -13 -22 -23 -2 7 -2 -4 8 4 11 16 15 21
Credit risk 26 24 35 44 38 34 24 24 18 16 16 12 6 16
Demand for loans 6 13 11 24 18 16 17 8 -6 -3 7 22 20 19
Note: 1) Lending behavior DI = {percentage of respondents answering 'significant easing (increase)' × 1.0 + percentage of respondents answering 'slight easing (increase)' × 0.5} - {percentage of respondents answering 'significant tightening (decrease)' × 1.0 + percentage of respondents answering 'slight tightening (decrease)' × 0.5} × 100
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-60 -40 -20 0 20 40 60
-60 -40 -20 0 20 40 60
I 2008
II III IV I
2009
II III IV I
2010
II III IV I
2011 II(e) Domestic Bank Lending Attitude Index
SMEs
Large Firms (easing)
Households (housing) Households (general)
(easing)
-60 -40 -20 0 20 40 60
-60 -40 -20 0 20 40 60
I 2008
II III IV I
2009
II III IV I
2010
II III IV I
2011 II(e) Domestic Bank Credit Risk Index
Large Firms (increase)
Households SMEs
(increase)
-60 -40 -20 0 20 40 60
-60 -40 -20 0 20 40 60
I 2008
II III IV I
2009
II III IV I
2010
II III IV I
2011 II(e) Domestic Bank Loan Demand Index
SMEs Large Firms
Households (general) Households (housing)
(increase) (increase)
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<How the Survey on Bank Lending Practices is Conducted>
1. Period of survey: March 10 ~ 21
2. Number of banks surveyed: 16 domestic banks
3. Method: survey conducted through interviews with senior loan officers
4. Items surveyed
□ The survey addresses three broad categories, i.e. lending attitude, credit risk and loan demand ― for corporate and household loans, which are further broken down into loans to large firms and SMEs, and to households for general purposes and for housing.
― The questions concern changes in each category over the past three months (Jan. to Mar. 2011), and the outlooks for the following three months (Apr. to Jun. 2011).
5. Lending Behavior Diffusion Index
□ A diffusion index is compiled for each category by taking the weighted average of the responses supplied by senior loan officers on a scale from 1 to 5. The index is benchmarked to a baseline of 0, and distributed from -100 to 100.
Items Surveyed and Possible Responses
1 2 3 4 5
Lending Attitude
Significant tightening
Slight
tightening No change Slight easing
Significant easing Credit risk Significant
increase
Slight
increase No change Slight decrease
Significant decrease Demand
for loans
Significant increase
Slight
increase No change Slight decrease
Significant decrease Lending behavior DI = {percentage of respondents answering 'significant easing
(increase)' × 1.0 + percentage of respondents answering 'slight easing (increase)' × 0.5} - {percentage of respondents answering 'significant tightening (decrease)' × 1.0 + percentage of respondents answering 'slight tightening (decrease)' × 0.5} × 100
□ An index reading above 0 signifies that the number of financial institutions responding "easing (increase)" is greater than that of those responding
"tightening (decrease)". A reading below 0 implies that the opposite is true.
