Economy & Politics

Banks feel well armed

IMF boss Kristalina Georgieva will lead the discussions at the autumn conference, which this year will take place virtually. Photo: dpa / Liu Jie

Credit institutions and public organizations around the world are endeavoring to support the recovery of the global economy with financial aid. This becomes clear at the IMF autumn meeting.

Frankfurt – The German banks want to continue to support companies in overcoming the current economic crisis by all means. Even if there were an increase in loan defaults in the coming months, this would not be a threat to the banks, said the President of the Association of German Banks (BdB), Hans-Walter Peters, in the context of the autumn meeting of the International Monetary Fund (IMF). The German institutes have made themselves weatherproof and have significantly increased their equity in the past. The Deutsche Bundesbank had already confirmed this in its financial stability report earlier this week. At the same time, the central bank had appealed to the credit institutions to leave the money tap open even if companies went bankrupt.

In this context, Peters recalled that the European credit institutions are suffering primarily from the low interest rate policy and the penalty interest rates of the European Central Bank (ECB). The bank president called for a significant increase in the allowances in order to quickly relieve the financial institutions. The ongoing strategy review of the ECB should also review negative interest rates. Since 2014, the institutes in the euro area have already paid more than 30 billion euros to the central bank. This year the pace has even increased in view of the increasingly plentiful supply of money from the ECB. The German institutes alone paid 1.7 billion euros from January to September; extrapolated to the full year, that would be 2.6 billion euros and thus almost 300 million euros more than in 2019, although there are now higher allowances. Across Europe, the institutes would have to pay 10.5 billion euros this year, 3.5 billion more than last year.

It is more difficult for medium-sized companies to obtain loans

In spite of the assurance of the credit institutes to support the companies to the best of their ability, according to the observations of the federally owned development bank KfW especially small and medium-sized enterprises are finding it more difficult to obtain loans. “The banks are granting loans to small and medium-sized enterprises increasingly restrictive, but remain moderate in tightening their lending policy,” said KfW chief economist Fritzi Köhler-Geib. Service companies as well as wholesalers and retailers are particularly affected. For the construction and manufacturing industries, however, the situation has improved. In contrast, according to KfW’s observations, access to loans has become easier again for larger companies. The proportion of companies that reported problems with their banks in the survey fell by 1.4 points to 15 percent.

Generally speaking, however, small and medium-sized companies no longer asked for as many loans as they did in the summer. According to KfW, the proportion of companies that conducted loan negotiations fell by 1.5 points to 30 percent. “That is a positive signal, because it indicates that the greatest financial problems facing companies are over for the time being,” said Köhler-Geib. “Whether it stays that way, however, depends crucially on the further course of the pandemic, and this uncertainty will further influence the investment activity of companies.”

$ 160 billion for the fight against Corona

This uncertainty is the greatest concern of most of the discussions at this autumn conference, which is being held in a purely virtual manner because of the pandemic. Fundamentally, there will be no shortage of the necessary financial resources to support the recovery of the economy, said IMF Director General Kristalina Georgieva. The IMF and its sister organization, the World Bank, would also spend a lot of money on fighting the pandemic. The World Bank has approved $ 12 billion to help developing countries buy and distribute coronavirus vaccines, as well as tests and treatments. Among other things, it should finance the vaccination of up to a billion people. The sum is part of a package from the World Bank group of up to 160 billion dollars (137.78 billion euros) to help developing countries fight the pandemic, the World Bank said. Emergency aid programs have already reached 111 countries. In addition, people in developing countries need access to safe and effective vaccines. That is why the World Bank is expanding its accelerated approach, declared its President David Malpass.


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