| NEW YORK
NEW YORK May 1 Bank lending conditions in
emerging markets worsened in the first quarter of 2014,
reflecting a weakened economic environment in many of the
world's developing regions, a new survey by the Institute of
International Finance showed on Thursday.
In the January-March period, the IIF's composite index of
Bank Lending Conditions Survey in emerging markets fell 1.2
points to 48.2. A reading below 50 reflects lending conditions
The weak conditions observed in the first quarter have been
in place for the last four quarters, IIF said.
Declining demand for loans was behind much of the
first-quarter drop, the IIF noted, citing results from its
survey of 125 banks based in emerging economies.
The survey also found a rising level of non-performing
loans, which reflect late or non-payments on existing credit.
This was a reversal from the improvement registered in its
survey from the fourth quarter of last year and banks are now
saying these NPL levels are expected to further deteriorate.
"The deterioration in bank lending conditions was led by
(emerging markets in) Europe and Latin America. Lending
conditions in EM Asia were tightened at the same pace as in the
fourth quarter of 2013, while those in Africa and Middle East
continued to ease," the IIF, a business association of the
world's biggest financial institutions.
Across five major categories tracked by the IIF, demand for
trade finance grew in the quarter, but not as robustly as in the
last quarter of 2013. Conditions deteriorated in the other four
categories: credit standards, non-performing loans, demand for
loans and funding conditions.
Tightening standards for extending credit were seen across
nearly all the major emerging market regions, especially in
Europe for consumer loans. Conditions for loans in Asia
continued to tighten albeit more moderately, while in the Middle
East and North Africa (MENA) conditions actually managed to
ease, but only by a slim margin.
As a result of more exacting standards for giving consumer
and housing loans in Europe, overall loan demand declined.
Demand for loans slowed in Sub-Saharan Africa, but continued to
increase in the MENA region.
"Among loan categories, demand for corporate loans was well
maintained, but demand for residential real estate dipped
significantly and that for consumer loans slowed markedly," the
International funding conditions maintained a steady but
moderate pace of tightening, meaning the ability to raise
capital was still not easy.
"In fact, EM Europe witnessed the most aggressive tightening
in both domestic and external funding conditions compared to
other regions," the survey said.
"The index for domestic funding conditions fell to 41.4, the
lowest since the second quarter of 2012, while the index for
external funding conditions reached 41.1, showing the most
tightening since the fourth quarter of 2011 as geopolitical
tensions in the region increased market volatility," the IIF
The survey was conducted between March 10 and April 7.
(Reporting by Daniel Bases, editing by G Crosse)