YPOIK invites bankers to increase loans

By Leonidas Stergiou

The Minister of Finance, Christos Staikouras, starts a new round of discussions with banks and business entities on liquidity in the economy, with the development of bank lending to companies and especially to small and medium-sized enterprises at the forefront.

According to the plan, a debate will take place in Parliament, most likely by the end of February, with the participation of the Bank of Greece, the Hellenic Banking Association and representatives of business bodies and chambers. The discussion is part of the periodic briefing of the stakeholders, with the aim of increasing loans to sustainable companies.

The goal is to create an additional 100,000 viable small and medium-sized enterprises eligible for bank lending within one year, through tax incentives for mergers-acquisitions, improving the financial profile and more flexible banking criteria that take into account the viability of investments .

The discussion opens at a time when there has been a decline in credit expansion to businesses from the third quarter of 2021, while the corresponding size to households remains negative. At the same time, the competition of the banks is focused on the big companies due to the Recovery Fund, where a great pressure on the interest rates is expected.

However, from the data of the Bank of Greece, at the moment when credit expansion to large companies was fatigue, it seems that there was a small increase towards small and medium enterprises. However, as noted by bank executives and observed by the Bank of Greece, the decline in credit expansion is mainly due to lack of demand for lending. Large companies found a way out of raising capital through bond issues, taking advantage of low interest rates and market liquidity. Much of the new capital has been repaid by bank lending. The smaller companies strengthened their cash with the turnover, after the opening of the economy, while the repayable advance program and the programs of the Hellenic Development Bank and other organizations, such as the European Investment Bank, contributed significantly.

According to the Bank of Greece, the annual growth rate of bank financing to companies, after recording double-digit rates in early 2021, then slowed down and in the third quarter of the year almost returned, and since then remained at the lowest levels. which he had just before the outbreak of the pandemic. Bank lending to households continued to shrink at an almost steady annual rate in the first ten months of 2021.

In the first ten months of 2021, the average monthly net flow of bank financing to businesses was only 53 million euros, compared to 558 million euros in 2020 (Jan.-Dec.). The average monthly gross inflow of regular bank loans to SMEs during this period amounted to 0.8 billion euros, about 3/5 of that of 2020 (1.35 billion euros, Jan.-Dec) – but still higher compared to the flow of 2019. Also, the average monthly balance of bank financing without fixed duration (credit lines and other facilities) to MFIs decreased in the ten months January-October 2021 compared to 2020 (Jan.-Dec) by 16.1% .

The significant slowdown in 2021 in the annual growth rate of loans granted by credit institutions to businesses is due to a number of factors that do not necessarily indicate a negative development, according to the BoG. After all, credit expansion to businesses had now reached historically high annual rates thanks to the adoption of credit enhancement measures. The end of the suspension of amortization payments after December ceased to have a positive effect on net credit flows.

In addition, the slowdown in the annual growth rate of business credit reflects the mitigation of demand for bank financing by businesses. More generally, limited corporate recourse to banks has been the result of a recovery in corporate profits in recent months as the economy recovers. In addition, the companies had created liquidity reserves as early as 2020, during which they raised additional loan resources from banks for reasons of future needs: first through the existing financing lines and then mainly through the programs of the Hellenic Development Bank (EBA). ). The repayable advance and the suspension of loan and tax liabilities, as well as employment contracts with state compensation, also contributed to an increase in the cash of companies and, respectively, their bank deposits.

In particular, the financial measure of the “repayable advance” strengthened the companies from the beginning of the pandemic to the month of its expiration (April 2021) with a total of 8.3 billion euros. with bond issues in 2020 – albeit lower than in 2019 – and especially in 2021 with higher issues compared to 2019. The companies also absorbed significant financial resources from the Group of the European Investment Bank and the European Bank for Reconstruction and Development. and Development (EBRD), either directly or (in the case of this Group) through domestic commercial banks.