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NEWS & RESEARCH
Business lending competition to pick up with recovery | SMH
March 29, 2010
Competition for small business lending is likely to pick up as the economy strengthens, the Reserve Bank of Australia has told a Senate inquiry.
A slowdown in lending to small business reflected both reduced demand for loans and a general tightening in bank lend standards, it said in a written submission.
"Since the onset of the (global financial) crisis, competition in lending has decreased," the bank said.
But the easing in competition was to some extent "cyclical".
"During periods of strong economic growth, banks tend to compete more aggressively for business lending by cutting their margins and relaxing their lending standards," it said.
"However, when the economic and business outlook is uncertain and loan losses are rising, as has been the case over the past couple of years, banks see the loans as being more risky and pull back a little."
Small businesses, through various lobby groups, have complained bitterly about reduced availability of credit both during and after the economic downturn, and what is available is hugely expensive to service.
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