Central Bank of BiH Conducted Survey on Bank Lending Activity

SARAJEVO, (Patria) - The Central Bank of Bosnia and Herzegovina (CBBH) conducted a survey on bank lending activity aimed at gaining insight into the trends in lending standards and conditions of commercial banks, as well as assessing the supply and demand for loans in BiH.

The results for the third and fourth quarters of 2020 have been published, showing a tightening of lending conditions on the supply side, accompanied by a decrease in demand for loans from both businesses and households.

The main factors influencing the tightening of credit conditions are related to risk perception, a consequence of worsened economic circumstances linked to the recession. Demand for loans from businesses shows varied trends, with a slight increase in demand for short-term loans registered in the fourth quarter of 2020, while demand for long-term loans decreased.

In the household sector, a decrease in demand for both consumer and housing loans has been observed for two consecutive quarters. Strong expectations regarding supply suggest that a significant easing of credit conditions is not expected soon, while regarding demand, a slight increase in demand for household loans and short-term business loans is anticipated. This market development is expected given the economic consequences of the COVID-19 pandemic, and similar trends are observed in other economies.

Conducting the survey on bank lending activity will enable more detailed analyses of trends in the credit market, thereby supporting analytical and research tasks within the CBBH, which will benefit both the business community and the wider public. The survey is conducted quarterly by collecting information from eight commercial banks that play a dominant role in the domestic market. The survey is based on 16 questions related to changes in the supply and demand for loans for non-financial enterprises and households, while also collecting expectations for the next three months.

The European Central Bank (ECB), through the conclusions of the Economic Dialogue between the European Union and the Western Balkans, has highlighted the importance of introducing this analytical tool. In this regard, this research is largely methodologically aligned with a similar survey conducted for the Eurozone. The Austrian National Bank provided extremely significant technical assistance in realizing this idea through an IPA project on strengthening the capacities of the central banks of the Western Balkans, thus gradually aligning with the operating principles of the European System of Central Banks.