London (MNI) – Corporate credit availability increased modestly in
the fourth quarter but lenders warn that adverse economic conditions and
tougher funding conditions could restrict future lending.

The fourth quarter Bank of England Credit Conditions survey showed
corporate credit availability improved more than that for households,
but there were risks credit would get tighter in coming months. The
survey also found lenders reporting a rise in defaults by medium and
large businesses, the first such rise in two years.

The Government launched a “credit easing” scheme in the November to
try and boost credit availability particularly for small and medium
sized enterprises. The scheme will take time, however, to come in and
have any impact and does not show up in this survey.

The Q4 survey showed the net balance of lenders reporting more
credit was available to corporates over the past three months rose to
11% from 3.9% in the Q3 survey. The corporate credit availability
balance for the next three months was 8.1%, up from 2.4% in Q3.

“While lenders expected credit availability to increase a little to
the household and corporate sectors in the coming quarter, factors such
as the economic outlook and tighter wholesale funding conditions were
expected to have a negative impact on credit availability,” the report
said.

It noted that lenders expected to tighten credit scoring criteria
for both households and SMEs and spreads had widened for the corporate
sector.

The secured household credit availability balance for the past
three months remained positive, at 1.9%, down from 8.4% in Q3. For the
next three months the balance rose to 7.6% from 6.9% in Q3.

While there were some warning signs on corporate defaults, lenders
reported that default rates for secured and unsecured household loans
had fallen in the past three months.

The BOE’s Q4 Credit Conditions Survey was conducted between Nov 22
and Dec 13, and covers all lenders with more than 1% of the
relevant market.

–London newsroom: tel+44 207 862 7491; email: drobinson@marketnews.com

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