MISH'S
Global Economic
Trend Analysis
The LTRO may have ignited the bond markets and the stock market but it did not do anything for bank lending. The New York Times reports Survey of European Banks Shows a Sharp Cut in Lending
Banks in the euro area cut lending sharply at the end of 2011, according to data published Wednesday, raising concern that Europe was on the verge of a credit crisis that could lead to a deeper recession than expected.
A quarterly survey of commercial banks by the European Central Bank showed a surge in the number of institutions that were becoming more restrictive about who they lent to, because the banks themselves were having trouble raising money and were under pressure from regulators to reduce risk.
“It is obvious that we see a deleveraging, a retrenching process unfolding,” Thomas Mirow, the president of the European Bank for Reconstruction and Development, said in an interview last week. He said the figures from the Bank for International Settlements showed “this is not just perception but reality.” The reconstruction bank provides credit to support the development of free markets in the former Soviet bloc.
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