Banks, more "generous" in granting loans - BoA: They eased standards in the second quarter. Demand from citizens increases
Commercial banks have been more "generous" with citizens in granting loans during the second quarter. According to the latest Bank of Albania survey on lending activity, banks have eased lending standards, both in consumer and real estate loans.
Credit standards are the internal guidelines or criteria for approving credit in a bank. The standards define the types of credit that the bank considers desirable and undesirable, sectoral or geographical priorities, collateral considered acceptable and unacceptable, etc. They also specify the necessary characteristics of the borrower (e.g. balance sheet conditions, income situation, age, employment status) in order to obtain a loan. The easing of standards by banks has come as a result of increased competition among them and higher tolerance for risk-taking. Standards are expected to be further eased in July-September.
On the other hand, the general terms and conditions for the loans remained unchanged.
In April-June, citizens also requested more loans. According to banks, this higher demand for loans came from consumer confidence, increased needs for financing the purchase of housing and consumer financing, the general level of interest rates, as well as banks' perception of the current and expected situation in the housing market. The law in force on the revaluation of real estate has also increased the demand for loans for the purchase of housing. In the third quarter, citizens are also expected to apply for more loans.
Banks responded to this demand by approving more loans, due to the borrowers' good relationships with the bank. On the other hand, credit history and disposable income had no impact on the approval rate.
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