Bank Lending Survey – Definition

Cite this article as:"Bank Lending Survey – Definition," in The Business Professor, updated April 17, 2020, last accessed June 4, 2020, https://thebusinessprofessor.com/lesson/bank-lending-survey-definition/.

Back to: BANKING, LENDING, & CREDIT INDUSTRY

Bank Lending Survey

A bank lending survey is a questionnaire circulated by the Central Bank to obtain information about the lending environment and also provide clarity to the understanding of the people about the lending environment. A bank lending survey asks questions such as the number of loans made, the interest rates charged on loans, default rates, questions about commercial and retail lending, demands for loans, among other questions. The survey also asks for information of the financial portfolios of a bank and the existing banks.

The Central Bank circulates the bank lending survey quarterly, semi-annually or as the situation demands. The Central Bank uses the information obtained from the survey in regulating the lending environment and the overall economy.

A Little More on What is a Bank Lending Survey

The Bank lending survey is circulated to banks to seek information about the lending environment, participating banks are given about two weeks to submit the bank lending survey.  In the United States, the Central Bank is known as the Federal Reserve, it circulates bank lending survey to participating banks every quarter, banks can also access the survey questions on the official website of the Federal Reserve.

Bank lending survey can take different formats which are decided upon by the Central bank depending on the information they need to obtain and the regulation they need to make. In the United States, for example, the bank lending survey conducted in January 2018 treated questions relating to the lending environment three months before the circulation and the survey has 71 participating domestic banks and 23 branches of foreign banks.

Reference for “Bank Lending Survey”

https://www.ecb.europa.eu/stats/ecb_surveys/bank_lending_survey/html/index.en.html

https://www.investopedia.com › Insights › Politics & Money

www.cnb.cz/en/bank_lending_survey/index.html

https://www.nbs.rs/internet/english/90/anketa_kab/index.html

https://www.banque-france.fr/en/statistics/loans/loans/bank-lending-survey

Academics research on “Bank Lending Survey”

The Euro area bank lending survey matters: Empirical evidence for credit and output growth, De Bondt, G., Maddaloni, A., Peydró, J. L., & Scopel, S. (2010). The Euro area bank lending survey matters: Empirical evidence for credit and output growth. This study examines empirically the information content of the euro area Bank Lending Survey for aggregate credit and output growth. The responses of the lending survey, especially those related to loans to enterprises, are a significant leading indicator for euro area bank credit and real GDP growth. Notwithstanding the short history of the survey, the findings are robust across various specifications, including “horse races” with other well-known leading financial indicators. Our results are supportive of the existence of a bank lending, balance sheet, and risk-taking channel of monetary policy. They also suggest that price as well as non-price conditions and terms of credit standards do matter for credit and business cycles. Finally, we discuss the implications for the 2007/2009 financial and economic crisis.

The bank lending survey for the euro area, Berg, J., Van Rixtel, A. A., Ferrando, A., De Bondt, G., & Scopel, S. (2005). The bank lending survey for the euro area. This occasional paper explains why the bank lending survey was developed by the ECB and describes its main features. It discusses the importance of credit developments for both the economy and the functioning of monetary policy, and further clarifies why the survey was introduced. Furthermore, the paper demonstrates that the value added of implementing a bank lending survey for the euro area lies in particular in the way it provides greater insight into developments in credit standards, non-interest rate credit conditions and terms, the risk perception of banks and the willingness of banks to lend. Credit standards are the internal guidelines or criteria of a bank which reflect the bank’s loan policy. The terms and conditions of a loan refer to the specific obligations agreed upon by the lender and the borrower. This occasional paper also considers similar surveys conducted by the Federal Reserve System in the US and by the Bank of Japan.

Bank-related loan supply factors during the crisis: an analysis based on the German bank lending survey, Blaes, B. (2011). Bank-related loan supply factors during the crisis: an analysis based on the German bank lending survey. This paper analyses the role of bank-related constraints in explaining the sharp slowdown in bank lending to non-financial corporations in Germany during the recent financial crisis. We use a panel approach based on a unique data set which matches the individual responses of the banks participating in the Eurosystem’s Bank Lending Survey with the corresponding micro data on loan quantities and prices. Our main finding is that bank-related supply and demand-side indicators were both important in explaining the slowdown of bank lending during the crisis years. The results suggest that the dampening impact of the bank-related restrictions was strongest from the third quarter of 2009 to the first quarter of 2010. Over this short period, more than one-third of the explained negative loan development was due to the restrictive adjustments of purely bank-related factors, such as the costs related to the bank’s capital, market financing conditions and the bank’s liquidity position.

The impact of supply constraints on bank lending in the euro area-crisis induced crunching?, Hempell, H. S., & Kok, C. (2010). The impact of supply constraints on bank lending in the euro area-crisis induced crunching? (No. 1262). ECB Working Paper. Aggregate loan development typically hinges on a combination of factors that impact simultaneously on the demand and the supply side of bank lending. The financial turmoil starting in mid-2007 had detrimental consequences for banks’ balance-sheets, cost of funds and profitability, thus weighing negatively on their ability to supply new loans. This paper examines the impact of supply constraints on bank lending in the euro area with a special focus on this turmoil period. The empirical evidence presented suggests that banks’ ability and willingness to supply loans affects overall bank lending activity in general and has done so particularly during the financial crisis. Applying a cross-country panel-econometric approach using a unique confidential data set on results from the Eurosystem’s bank lending survey allows us to disentangle loan supply and demand effects. We find that even when controlling for the effects coming from the demand side loan growth is negatively affected by supply-side constraints. This applies both for loans to households for house purchase and for loans to non-financial corporations. We furthermore provide evidence that the impact of supply-side constraints, especially related to disruptions of banks’ access to wholesale funding and their liquidity positions, was reinforced since the eruption of the financial crisis and corresponding adjustments in banks’ loan portfolios seem to have been geared primarily via prices rather than outright quantity restrictions.

The level effect of bank lending standards on business lending, van der Veer, K. J., & Hoeberichts, M. M. (2016). The level effect of bank lending standards on business lending. Journal of Banking & Finance66, 79-88. Do tightenings of bank lending standards permanently reduce bank lending? We construct a measure of a bank’s level of lending standards using micro-data from the sample of banks participating in the Eurosystem Bank Lending Survey in The Netherlands and show that this level measure affects business lending. The level effect is statistically robust and economically relevant; a one point tightening reduces a bank’s quarterly growth rate of business lending by about half a percentage point until bank lending standards are eased. This level effect of bank lending standards helps to explain low bank lending growth after a period of prolonged tightening as well as high bank lending growth in a period of prolonged easing. As such, the analysis provides another potential indicator for macroprudential policy.

Was this article helpful?