Central Bank of BiH: Reduced Demand for Loans to both Companies and Households

The Central Bank of Bosnia and Herzegovina (CBBH) conducted a survey on credit activity of banks, the aim of which is to gain insight into the trends of standards and conditions of commercial banks’ lending, and to review the supply and demand for loans in BH.

The results for the third and fourth quarters of 2020 have been published, which show that on the supply side, the lending terms have become stricter, while at the same time, reduced demand for loans to both companies and households was recorded. The main factors influencing the tightening of credit terms are related to the perception of risk, which is a consequence of the worsening economic circumstances related to the recession. Demand for loans from companies has different trends, and in the fourth quarter of 2020, a slight increase in demand for short-term loans was recorded, while the demand for long-term loans decreased. In the household sector, for two consecutive quarters, there has been a decrease in demand for both consumer and housing loans. Expressed expectations in terms of supply show that credit terms are not expected to ease soon, and in terms of demand, a slight increase in demand for household loans and short-term corporate loans is expected. This development in the market is expected given the economic consequences of the pandemic caused by the COVID-19 virus, and similar trends are observed in other economies.

Conducting a survey on banks’ lending activity will enable more detailed analyses of trends in the credit market, and will thus support analytical and research tasks within the CBBH, which will benefit both the business community and the general public. The survey is conducted quarterly through the collection of information from eight commercial banks, which have a dominant role in the domestic market. The survey is based on 16 questions related to changes in the supply and demand for non-financial companies and households loans, and at the same time collects expectations related to the next three months.

The European Central Bank (ECB), through the conclusions of the Economic Dialogue between the European Union and the Western Balkans, suggested the importance of introducing this analytical instrument. Related to this, this research is significantly methodologically aligned with a similar survey conducted for the euro area. In the implementation of this idea, we have received the extremely important technical assistance from the Austrian National Bank, through the IPA project on strengthening the capacity of the central banks of the Western Balkans, thus achieving the gradual harmonization with the principles of the European System of Central Banks.

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