The report among other things revealed increased loan default by households and businesses, which prompted banks to increase lending rates and tighten lending criteria.
The report stated: “Secured loan performance, as measured by default rates deteriorated in the review quarter. However, lenders expect lower default rates in the next quarter. Total unsecured loan performance to households, as measured by default rates worsened in Q4 2016 but was expected to improve in the next quarter.
“Corporate loan performance worsened across all firm sized businesses in the current quarter as default rates on lending to small, medium and large Private Non-financial Corporations (PNFCs) worsened in the current quarter, but was expected to improve in the next quarter.
“Due to lenders resolve to tighten the credit scoring criteria for total unsecured loan applications in Q4, 2016, the proportion of approved total loan applications for households decreased in the quarter. Lenders expect to further tighten the credit scoring criteria in the next quarter, and are still of the opinion that the total loans applications to be approved in Q1, 2017 will further decrease. “
“Similarly, lenders tightened the credit scoring criteria for granting credit card loan applications and expect the proportion of approved credit card applications to decrease in Q4 2016 “Lenders resolve to tighten the credit scoring criteria in granting overdraft/personal loan applications in the current quarter reduced the proportion of approved household’s overdraft/personal loan applications in the current quarter. Lenders required lower loan covenants from small businesses and medium PNFCs sized businesses and stronger loan covenants from large PNFCs and OFCs in the current quarter.
“Lenders reported that the overall spreads on secured lending rates on approved new loans to households relative to MPR widened in Q4 2016, but was expected to narrow in Q1, 2017. Lenders reported that spreads on credit card lending narrowed in Q4, 2016 and were expected to narrow further in the next quarter.”
“However, spreads on overdrafts/personal loans widened in Q4, 2016 but were expected to narrow in the next quarter. Changes in spreads between bank rates and MPR on approved new loan applications to small businesses, medium & large PNFCs and other financial corporations (OFCs) widen in Q4, 2016.
” Similarly, spreads on loans to all size businesses, were expected to widen further in the next quarter.”
