Chile cenbank sees less restrictive loan environment in Q3

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Monday, October 17, 2016

In its Q3 report on the national survey of lending institutions, Chile's central bank said that fewer of those polled saw a more restrictive scenario for obtaining credit and fewer saw demand weakening further in Q3 compared to Q2.

The report, published this week, showed that credit availability was still restrictive and demand remained weak in the quarter "with the exception of housing and construction." The bank stressed that "offer and demand for consumer credit ... appears less restrictive and stronger than in the previous quarter."

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The survey measures banks' perceptions on the supply and demand for loans.

While access to household credit remained limited in the third quarter, the percentage of banks saying that access to credit was more restrictive in Q3 quarter-on-quarter fell to 14% from 36% in the Q2 survey.

The report also showed that 33% of companies polled considered the housing credit market to be more restrictive in Q3.

The standards for approving loans for large companies did not change in the opinion of 81% of the financial institutions polled, and the percentage of those saying that conditions for credit provided to large firms were more limited in Q3 declined to 19% from 36% in Q2.

As regards housing credit, 46% of the banks surveyed reported more limited availability in Q3 compared to 64% in Q2. Looking at the same comparison for the construction sector, 23% said availability was lower, while that figure reached 39% in Q2.

Also, 21% of banks saw weaker demand for consumer credit in Q3, compared to 50% in Q2. For housing credit, demand was worse in Q3 according to 33% of banks polled, opposed to 58% in the previous quarter.

Conversely, only 14% and 17% of banks saw stronger demand in the quarter for consumer and housing credit, respectively.

Some 38% of banks saw credit demand from large firms weaken in the third quarter, compared to 50% in the second quarter, while only 6% of those polled said that credit demand from large firms was stronger, as opposed to 13% in the previous quarter.

Demand for financing from housing and construction firms appears to have weakened in Q3 with 82% of banks saying it was lower in the quarter, compared to 73% in the previous quarter. With construction firms, 46% of those surveyed saw weaker demand, compared to 62% in Q2.

The lower demand reflects the slower loan growth measured in August when total loans were up 5.37% year-on-year, compared to 5.59% in July. The related weakening of bank profits led Moody's to give the nation's banking sector a negative outlook.

The Chilean banking system has seen some significant relevant changes since 2013, namely the introduction of interest rates caps on consumer loans, gradual tax increases and higher reserve requirements.