Germany’s banks tighten credit, risk recovery - survey

29 July 2009 16:23  [Source: ICIS news]

TORONTO (ICIS news)--Germany’s banks are tightening access to credit and loans, a move that could choke off an emerging recovery in Europe’s largest economy, Munich-based Ifo research institute said on Wednesday, citing an industry survey.

The survey – which was based on some 4,000 responses of firms in industry, manufacturing, construction, wholesaling and retailing – found 45.1% of respondents assessing banks’ lending policies as restrictive.

Access to credit had become clearly more difficult in July compared with June, according to the respondents.

Complaints about restrictive credit policies by banks had increased across all economic sectors, Ifo said.

Banks were tightening credit despite the European Central Bank’s expansive monetary policies, it added.

This raised the risk that tight lending could choke off Germany’s hoped-for economic recovery, the research institute said.

The credit concerns echoed recent remarks by BASF CEO Jurgen Hambrecht, who said in an interview this month that tight lending practices by Germany’s banks were a key concern among many of the company’s customers.

Smaller and medium-sized firms in particular were having a very hard time getting bank loans and credit, Hambrecht said.

Germany’s finance minister, Peer Steinbruck, told media on Wednesday that he may request the country’s federal bank, the Bundesbank, to make direct loans to industry.

Also on Wednesday, the Berlin-based DIW economic research institute said Germany’s government may need to inject additional equity capital into banks to encourage them to ease lending.

In line with its earlier forecast, DIW said Germany’s economy would shrink 6.4% this year.

While production had hit a bottom, Germany’s recovery would be slow, with the unemployment rate forecast to hit double digits next year, DIW said.

In related news, Bayer on Wednesday reported a plunge in second-quarter sales volumes at its MaterialScience division and said that certain capacities within that segment would be permanently shut by the end of the year.

BASF is due to report second-quarter results on 30 July.

Germany’s chemicals production this year is expected to fall by 10% and sales by 12% compared with 2008, according to chemical producers association VCI.

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