For a long time, the trade press and experts have warned of a new banking crisis. It seems as if the banks have forgotten the misery they have maneuvered themselves and their investors. And one can probably assume that a renewed bailout would not make the taxpayers jump for joy. Nevertheless, lending has hardly improved eleven years after the big crisis. Of course, this is not about the small loans that banks spend on their private clients. Rather, they are again investing diligently in partially highly indebted companies. The perfect thing about it, unlike private loans, they do without collateral. Instead, they charge higher interest rates. This means that in the event of a new crisis or a corporate bankruptcy, banks voluntarily refrain from repaying much of the loan amount because they receive higher interest rates during the repayment term.
An American trend spills to Europe
In almost 80% of the loans granted US banks deliberately renounce security mechanisms. For example, they do not require companies to repay open loans if they do not sell or bind borrowers to a maximum debt limit. Many of these questionable loans are no longer directly assigned to companies by banks. Instead, they switch private loan providers in between. These are less closely and strictly monitored by the supervisory authorities than banks since the Lehman bankruptcy. But even in Germany, this questionable granting of loans is gradually increasing. Now the European banking supervision wants to put a stop.
The EBA plans to stem the business with bad loans
It therefore becomes clear why the credit line is still an expensive affair for consumers. An interest rate in the double-digit range is still commonplace. In addition to being tied to a reference rate designed by agreement of all European banks, lenders also like to refer to the high administrative burden. He was higher on a discretionary loan than on an installment loan.
At a conference in Vienna, the chief bank supervisor of the European Central Bank ECB announced that it would step up its efforts to banks and credit institutions. This means that the financial market supervisory authority and the ECB will jointly monitor lending more closely and rigorously in the future. Both institutes warn that banks are too generous, uncritical and cheap in their capital increase, which could later lead to repayment problems for companies and thus to a new crisis.
The ECB requires banks operating in the European region to recover the full amount of credit on large loans forfeiting the above collateral within two years. If the banks demand collateral from the companies, this period is seven years. Whether the next banking crisis but another seven years in coming, is questionable. After all, ECB and FMA also presented rules on how banks should deal with already issued, bad loans.
As a further security measure, the Financial Regulator will in the future rigorously check how problematic loans at individual banks are ordered. It is thus controlled how many such unsecured loans in which amount a bank has assigned to which companies. From this ratio, the ECB supervision depends on how many risk experts a bank must have employed. With these methods, the EBA wants to stop the already used process of lax lending in order to avoid another crisis.