The Bank of Latvia

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Bank of Latvia

Aware of the importance of bank loans in the economic development of Latvia and their impact on monetary policy decisions, in 2007 the Bank of Latvia launched a regular bank lending survey. The results of the bank lending survey, apart from disclosing additional information about banks' lending business, give a better understanding of the trends in lending and the reasons in their changes, as well as provide a better perception on economic outlook. The main objectives of the bank lending survey are: 1) to obtain additional information on credit markets both with regard to resident enterprises (non-financial corporations) and resident households; 2) to identify, if any, changes in bank credit standards as well as in terms and conditions; 3) to obtain information on various factors affecting loan demand and supply; 4) to obtain information whether the banks intend to change lending standards in a foreseeable future, and what changes can be expected on the demand side; 5) to clarify other issues related to the developments in lending that are topical for the Latvian economy.

The Bank of Latvia conducts the survey on a semi-annual basis (in January and July), asking the banks to answer questions on developments in lending during the recent half-year and offer their expectations for the current half-year. The regular respondent base consists of 9–10 banks and branches of foreign banks.

Responses to the survey questionnaire reflect the assessment by the banks' senior loan officers. Summarised responses from banks indicate the direction of changes. The indicator of change is the difference (net percentages of banks) between the share of banks reporting the change of the indicator in one direction and the change in the opposite direction. The weight of each individual responding bank's loan portfolio is ignored.

An example: out of 10 banks responding about credit standards, two are reporting "tightened considerably", three "tightened somewhat", one "remained basically unchanged", three "eased somewhat" and one "eased considerably". Thus, the net percentages of banks reporting tightening of standards is equal to (2 + 3 - 3 - 1) : 10 x 100 = 10%. "Expected" is the net percentages of banks calculated from the responses to the question about banks' projections for the current half year.

The results of the January 2010 bank lending survey