Objective of the bls

Collecting specific information regarding credit standards (other than interest) through a survey of loans granted by banks in the euro area is important to the Eurosystem, as credit is crucial to the functioning of the economy as well as to the transmission process of monetary policy decisions.

As credit institutions try to match the demand for financial means with their supply, they play an key role in the functioning of the economy, also with regard to the financing of entities who have in general less abilities to access the capital market. As a rule, credit supply is determined by the willingness of banks to grant credit. When banks opt for a more cautious approach in granting credit - for example because of less positive expectations of future economic development - this could lead to a decrease in expenses made by borrowers who face difficulties in finding alternative financing sources, and thus also to a possible slowdown of the growth in the economic activity. On the contrary, the economic activity could be stimulated when banks - in accordance to an optimistic outlook - ease their policy of approval of credits. This can also lead to increasing the cost of financial and real assets and to inflationary tensions.

Besides the importance of credits from banks to the functioning of the economy, the behavior of these banks with respect to the granting of credit will also influence the way in which the monetary policy affects the economy, or put in other words, the way in which monetary policy decisions affect the economy in general and the prices in particular. This "credit channel" can operate in several ways, namely via the supply of credits from banks ("credit channel from credit institutions in strict meaning"), via the availability and value of necessary guarantees to obtain a financing ("balance sheet channel") or via the availability of cash and cash equivalents ("cash flow channel").

In addition, the results of the survey provide information about the course of the demand for credit and their contributing factors.

Finally the results of the bls-survey not only complement existing statistics, but also offer a possibility to interpret their evolutions. Moreover, the information derived from the questions regarding the expectations should contribute to a better insight in future economic developments, and ease economic forecasts.