This concern was expressed by Olivier Gorincha, chief economist at the Monetary Fund, who said that “the story is not over yet”, noting that banks in the European Union are not immune to problems. , as long as the bloc does not move forward in completing the mechanisms that have been discussed for some time. Long time to deal with troubled banks.
A survey of senior U.S. loan officials, conducted by the U.S. Federal Reserve, showed banks worried about conditions ahead, with a focus on the slowing economy and deposit outflows .
Building on that concern, U.S. banks tightened lending standards in the early months of this year, in an approach the Fed plans to continue through 2023.
Among the most frequently cited justifications are the expected deterioration in the credit quality of loan portfolios and collateral values, as well as a decrease in risk tolerance.
Among other reasons, adds the survey, “concerns about bank funding costs, the liquidity situation of banks and the outflow of deposits abroad”.
Respondents pointed to tougher standards and lower demand in the first quarter of the year for various types of business and family loans.
In terms of commercial and industrial lending, mid-sized and other banks highlighted their liquidity situation and issues more, including growing concerns about the implications of legislative changes.
Banks’ concerns also centered on the uncertain economic outlook.
In a separate financial stability report released on Monday, the first since the recent collapse of four regional banks, the central bank highlighted concerns about tightening credit conditions.
The Fed report said, “Concerns about the economic outlook, credit quality and liquidity could cause banks and other financial institutions to reduce the supply of credit in the economy.”
“A sharp contraction in the availability of credit will increase the cost of financing for businesses and families, which would lead to a slowdown in economic activity,” he added.
Analysts have recently warned that the full impact of the March banking shock is yet to be seen.
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