Emerging Market Bank Lending Conditions Improve, IIF Reports

Bank lending conditions in emerging markets improved for the first time in more than a year as accommodative central bank policies made funding easier, the Institute of International Finance said.

An index tracking lending conditions in developing nations rose to 50.5 in the fourth quarter of 2012, from 49.9 in the preceding three months and 48.6 in the second quarter, according to a survey released today by the institute, which represents some of the world’s largest commercial banks and financial firms. The index has been below 50 for five straight quarters, a reading that shows conditions are worsening.

“International funding conditions for banks in emerging market economies continued to ease significantly in the fourth quarter of 2012, reflecting the very easy monetary policy in mature economies,” the Washington-based IIF said in a statement. “Similarly, domestic funding conditions have eased substantially as the monetary policy in emerging economies remained highly accommodative. Banks in emerging Europe and Latin America have particularly benefited from that trend.”

While funding eased the conditions on the supply side, loan demand continued to weaken and credit standards were tightened as non-performing loans continued to increase, especially in emerging Europe and Asia, the IIF said.

The survey was conducted among 141 banks between mid-December and mid-January, the IIF said.

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