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Bank lending to European businesses down 25% to just $2.6 trillion

Staff Writer | September 28, 2017
Bank lending to the private sector in Europe is now on average 25% lower last year than it was before the financial crisis.
Bank lending
Banking   Bank lending to the private sector
This is according to a new study by UHY, the international accounting and consultancy network.

According to UHY, in 2016 a total of $12.2 trillion was lent to businesses in the European economies studied – down from $16.3 trillion in 2008.

By contrast, on average across all the 24 countries studied around the world, private sector bank lending increased by 24% over the same period in absolute terms.

UHY says that countries like Spain and Ireland which were hardest hit by the banking crisis are seeing the slowest recovery in private sector credit.

Bank lending to the private sector in Ireland is 69% below 2008 levels ($148 billion in 2016, down from $475 billion), while in Spain, it is 51% lower ($1.3 trillion down from $2.7 trillion).

Even in Germany, widely seen as the economic powerhouse of Europe, there was a 21% decrease, falling to $2.6 trillion last year from $3.3 trillion in 2008, and the UK is also down by 20.3%.

UHY says that small businesses continue to be worst affected by the ongoing bank lending slump.

This is partly due to regulators tightening banking rules in response to the financial crisis to increase the amount of capital banks need to hold to cover their liabilities.

With less capital available to lend, banks tend to be more likely to focus on larger businesses that they see as having better security and repayment prospects.

Smaller businesses more negatively impacted by the fall in bank lending as they are less able than large corporates to rise cash by issuing corporate bonds as an alternative for bank loans.