Regulatory and policy measures supporting lending
Banks operating in the region reported that regulatory and policy measures to support lending have played a significant positive role. Notably, banks that took advantage of public guarantee schemes indicate that these have been very effective in supporting loan extensions —a recurrent finding over the last three survey waves. Those banks taking advantage of central bank refinancing operations consider that these facilities have supported credit conditions.
Among the set of regulatory and policy measures, some seem to have been more active than others in supporting lending to the economy. In particular, flexibility on NPL treatment is deemed very supportive. Various forms of capital relief measures, including the release of regulatory buffers, have also contributed significantly, as have the adjustment of risk-weights and avoidance of procyclicality under IFRS 9.
The autumn 2021 release of the survey paints a brightening picture of the banking systems in the CESEE region, albeit remaining pockets of uncertainty and downside risks.
COVID-19 pandemic effects were strong but demand rebounded and supply conditions started slowly to ease. Demand for loans is robust in the household segment and it is coming back also on firms’ fixed investment. Supply conditions are easing, but mostly in the household segment. As a result, scoring demand against supply conditions, SMEs seem to still suffer the most.
Moreover, NPLs decreased over the past six months with no NPLs spike so far, but uncertainty remains elevated. Against this backdrop, banking groups operating in the region show a supportive strategic assessment, with a positive and selective approach in terms of operations backed by increased profitability.
Finally, yet importantly, aggregated deleveraging has been avoided so far on the back of the ample national and international policy response.
Luca Gattini heads the macroeconomic scenarios unit of the European Investment Bank’s Economics Department