Central Bank of Bosnia and Herzegovina: reduced demand for loans to businesses and households
The Central Bank of Bosnia and Herzegovina (CBBH) conducted a survey of banks’ lending activity, the purpose of which is to better understand trends in lending standards and conditions of commercial banks and to examine the supply and application for loans in BiH.
The results for the third and fourth quarters of 2020 have been released, showing that on the supply side, lending conditions have become more stringent, while at the same time, a reduction in the demand for loans to businesses and consumers. households was recorded. The main factors influencing the tightening of credit conditions relate to the perception of risk, which is a consequence of the worsening economic conditions linked to the recession. The demand for business loans has different trends and in the fourth quarter of 2020 there was a slight increase in the demand for short-term loans, while the demand for long-term loans declined. In the household sector, for two consecutive quarters, the demand for consumer and housing loans declined. Expectations expressed in terms of supply show that credit conditions are unlikely to ease anytime soon, and in terms of demand, a slight increase in demand for short-term household and business loans is expected. This market development is expected given the economic consequences of the pandemic caused by the COVID-19 virus, and similar trends are being observed in other economies.
Conducting a survey of bank credit activity will allow more detailed analyzes of credit market trends, and thus support analytical and research tasks within the CBBH, which will benefit both businesses. and the general public. The survey is conducted quarterly by collecting information from eight commercial banks, which have a dominant role in the domestic market. The survey is based on 16 questions related to the evolution of supply and demand for loans to non-financial companies and households, and at the same time collects expectations for the next three months.
The European Central Bank (ECB), through the conclusions of the economic dialogue between the European Union and the Western Balkans, has suggested the importance of the introduction of this analytical instrument. In this context, this research is methodologically significantly aligned with a similar survey carried out for the euro area. In the implementation of this idea, we have received extremely important technical assistance from the Austrian National Bank, through the IPA project on capacity building of the central banks of the Western Balkans, thus achieving the gradual harmonization with the principles of the European system of central banks.