Lenders tightening business loan conditions, bank survey suggests
Data collected by the Bank of Canada suggests that Canada's major lending institutions were tightening the terms and raising the prices of loans to businesses in September.
Details from the bank's survey, released Friday, confirm anecdotal reports and indirect evidence that Canadian lenders, like their international counterparts, are reacting to the global credit crisis by cutting back lending.
"There was a near-record shift in responses towards tighter pricing (47 per cent) and non-pricing (53 per cent) aspects of lending conditions," the bank said. The non-pricing responses indicate that lenders tightened the terms for loans or limited the amount allocated to some sectors, regions or businesses."
The figures represent the proportion of respondents saying they were tightening conditions, minus the proportion reporting eased credit conditions.
The overall balance was the highest since the survey began in 1999, "indicating that a large portion of respondents reported tightening to all thee types of business borrowers: small business, commercial and corporate."
But the report only indicates only direction of the change, not its strength.
The survey was done between Sept. 11 and 26, before the central bank and government took three steps to address the tight credit markets:
On Friday, the federal government committed $25 billion to buy mortgage-backed securities so lenders would open the taps.On Wednesday, the central bank cut interest rates by 0.5 percentage points, but the commercial banks only passed on half the drop.On Oct. 3, the Bank of Canada made $12 billion available to lenders so they would ease the terms on loans.The bank said the business lending survey involved senior lending officers at 11 institutions. It was the first time the bank ever released information from the senior loan officer survey.
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