Booming credit market – first concerns about the scale

Bank lending to businesses and individuals is booming and has now reached such a level that the first financial market experts are voicing their concerns about future developments.

The volume of corporate loans has risen to 1.2 trillion dollars

The extent of lending to companies and individuals leads to the “discomfort” of numerous financial market experts. Meanwhile, the credit volume had reached the level before the outbreak of the financial crisis, as reported by Lite Lending (Wednesday). As long as the economy runs smoothly, the loans granted are not a major problem, but as soon as the economy stalls, the first banks could start to skid.

The financial institutions are not exactly reluctant to legend. The competition is tough. “The corporate customer business in Germany is currently not only competitive, there are fighting conditions,” said Chris Lib, CFO of Cream Bank. Current practice cannot go on forever. The crisis will begin at a time when corporate bankruptcies are increasing. This also increases the risks for banks.

The long-term average of the annual increases in credit volume has been just 0.8 percent since 2004. The volume of loans granted has now reached the 1.2 trillion mark. At the same time, the average corporate loan margin shrank to 1.41 percent.

Isn’t that what the Best Bank wants?

Everything is going as desired. The Best Bank set interest rates to zero or negative in order to explicitly fuel the economy by increasing lending to the real economy. Low interest rates and around 2.6 trillion dollars pumped into the markets through bond purchases have apparently not failed to have an impact. A second “desired parameter” of the Best Bank is annual inflation in the region of almost 2 percent. This brand has been exceeded in the German economic zone within the euro area since May 2018, at least.

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