German Banks More Reluctant to Lend

It is becoming more difficult for companies in Germany to obtain new loans. In September, 29.2% of companies in ongoing credit negotiations reported restraint on the part of banks. In June, that figure was only 21.3%. “Banks are gradually increasing interest rates on loans and are more reluctant to grant them,” says Klaus Wohlrabe, Head of Surveys at ifo.

“When the economy is weaker, companies also have to provide more in the way of credit security,” he adds. The rise in the ifo Credit Constraint Indicator was mainly attributable to service providers (from 21.8% to 31.5%) and manufacturing (from 20.7% to 27.7%). Among manufacturers of electrical equipment, just under 40% of companies report reluctance on the part of banks. For manufacturers of machinery and equipment, this figure is 31.6%. Due to the difficult situation in residential construction, banks are also cautious with real estate companies (31%). In the event industry, the figure is some 35%.

The proportion rose in retail as well, from 20.5% to 28.2%. For many retailers, the economic situation remains difficult due to customers’ reluctance to spend. This is also reflected in the lending conditions. The situation was similar in the construction sector, where 29.4% (down from 26.9% in June) reported restrictive lending. Only in wholesale was there a decline, from 22.6 to 20.2%.