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BUSINESS NEWS JAN 18, 2008
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Average weekly earnings in Irish distribution and business services were up by 4.2 % in September 2007

European Central Bank reports tightening in Eurozone bank lending in the fourth quarter of 2007

Markets News Friday: Shares of leading US bond insurer plunges 51% triggering fears of deepening in credit crisis

Trichet says underlying Eurozone productivity trends are a “disgrace”

Japanese consumer confidence plunges to more than four year low

Friday Newspaper Review - Irish Business News and International Stories

China becomes world's top Gold producer ending South African dominance dating from 1905

European Central Bank reports tightening in Eurozone bank lending in the fourth quarter of 2007

The European Central Bank (ECB) today published its report on the results of the January 2008 bank lending survey for the Eurozone.

Chart 1a. Changes in credit standards applied to the approval of loans or credit lines to enterprises

(net percentages of banks contributing to tightening standards)

05Q4-07Q4

The ECB says that the results of the January 2008 bank lending survey relating to the fourth quarter of 2007 indicate a further increase in the net tightening of credit standards for loans to enterprises (from 31% in the third quarter of 2007 to 41% in the fourth quarter of 2007). The sharp tightening reflects the deterioration of financial market conditions since the start of the credit crisis in August and a worsening of banks’ situation.

For the fourth quarter of 2007, banks also reported a further net tightening of credit standards for loans to households for house purchase (from 12% in the third quarter of 2007 to 21% in the fourth quarter of 2007). In addition, credit standards for consumer credit and other lending to households were tightened (from -3% in the third quarter of 2007 to 10% in the fourth quarter of 2007), compared with a net easing of credit standards in the previous quarter.

With regard to the demand for loans, banks reported that net demand for loans to enterprises remained slightly positive in the fourth quarter of 2007, but declining further compared with the previous quarter. Net demand for loans to households for house purchase dropped considerably in the fourth quarter of 2007 and was significantly negative, and net demand for consumer credit and other lending to households also fell considerably over the same period, to negative levels, after a slightly positive demand in the third quarter of 2007.

This survey round also contains a set of ad hoc questions as a follow-up to the ad hoc questions included in the October 2007 survey, which address the effect of the financial turmoil on credit standards and lending. Similar to the results in the last survey round, responding banks reported that credit standards on loans to enterprises were more affected by the turmoil than credit standards on loans to households. In addition, across all loan segments, a greater proportion of banks expect the financial turmoil to have an effect on credit standards over the next three months than the proportion of banks that reported such an effect over the past three months.

The ECB says that banks generally reported that the recent turmoil in financial markets has created more difficult conditions for accessing wholesale funding over the past three months, and is expected to continue to hamper funding over the next three months. In particular, securitisation activity was considerably hampered according to responding banks. In addition, over the past three months banks’ willingness to lend seems to have been impaired somewhat by the effect of the financial turmoil and is expected to continue to be affected over the next three months.

The bank lending survey has been developed by the Eurosystem in order to enhance the understanding of bank lending behaviour in the 15-country region.

The survey is conducted four times a year, usually at the beginning of each quarter. The ECB says that the conduct of the January 2008 survey was, however, brought forward by around one month in order to provide additional information to monitor the ongoing developments in financial markets. The survey also included a set of ad hoc questions which aim to gauge the extent to which the financial market tensions experienced in the second half of 2007 have affected banks’ credit standards for loans and credit lines to enterprises and loans to households in the euro area. The cut-off date for the receipt of data from banks participating in this survey was 8 January 2008.

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