For the second quarter of 2021, the banks that participated in the Central Bank Bank Lending Survey envisage further tightening of lending criteria for households, unchanged criteria for lending to businesses and increasing the demand for loans in all categories.
However, the CBC survey records the reversal of banks' expectations for the demand for loans brought about by the coronavirus pandemic in the first quarter of 2021, which at the same time led to a stricter criteria, which is demonstrated by the increase in the proportion of applications. which were rejected against all applications.
“In short, the unpredictable outbreak of the pandemic in early 2021 seems to have significantly affected the demand for loans, both from households and businesses, overturning estimates for the first quarter of 2021, where during the January 2021 survey, “Banks expected an increase in demand in all categories of loans,” the CBC said.
The increase in cases around the end of 2020 and the strengthening of restrictive measures, according to the CBC, have led to a decrease in demand for borrowing from both households (reduced consumption and increased deposits due to uncertainty about their future financial situation) and by companies (reduction in demand for fixed investments due to uncertainty about future economic prospects).
At the same time, according to the CBC, despite expectations for further stricter lending criteria for businesses, this did not materialize, as it seems that banks' risk perception and risk tolerance improved in the first quarter of 2021 compared to previous quarter.
“This may be due to the fact that the first elements of loan repayments after the end of the first moratorium seem to be encouraging, as only a small percentage until then had arrears in their repayments,” the CBC explains, adding that it may also be due to Discussions on the provision of state guarantees for loans to companies but also on the agreement on the channeling of state aid by the European Commission in support of Cypriot companies affected by the pandemic.
In this regard, however, the CBC notes that based on the banks' expectations for the second quarter of 2021, the criteria for lending to businesses in Cyprus were expected to remain unchanged, while for households for all categories of loans they were expected to become even stricter compared to the previous quarter.
Finally, regarding the expectations of the banks participating in the survey for the second quarter of 2021, the net demand for loans, both from businesses and households for all categories of loans was expected to record a further increase, compared to the quarter in question.
source: alphanews.live
