1) Domestic credit growth the result of enterprise credit growth
2) Growth in credits drawn from foreign financial institutions
3) Bond issues an alternative to banking credits
4) Share of credits granted to the private sector continues to increase
5) Allocation of credits to specific industries
6) Development of credits to privatisation influenced by large-scale privatisation
7) Short-term credits predominate in newly granted credits
1) The total issue of domestic credits is affected by a key item, i.e. credits to the enterprise sphere and households which increased to CZK 78.5 bn during the period under review. The total growth in domestic credits amounted to CZK 61.4 bn (+ 8.6%), government indebtedness to the banking sector declining by CZK 23.2 bn, and the NPF net position by CZK 6.1 bn.
Comparison of the same periods of 1994 and 1993 shows a difference only in the NPF net position, when, in contrast to the growth in 1993, its surplus declined this year. A lower increase in enterprise indebtedness in 1994 affected the increased inflow of resources from abroad.
2) In addition to credits acquired from domestic banks, enterprises obtain resources from abroad. Healthy enterprises are primarily motivated to draw credits abroad by the better availability, particularly of long-term loans, lower interest and the poorly developed capital market (more detailed information in the section Balance of Payments).
3) In a developing capital market, the issuance of enterprise bonds will become a more and more significant form of acquiring means for financing the entrepreneurial sector. At present, it is not a serious competitor in the reallocation of primary deposits. In January to September this year, the issue of publicly tradable enterprise bonds amounted to CZK 7.8 bn (bonds issued by banks and municipalities excluded) and publicly non-tradable bonds amounted to CZK 2.1 bn. The volumes of individual issues vary significantly, from several million to several billion crowns, depending on the issuer.
4) Ongoing changes in ownership relations in the economy, along with private sector support, continue to determine the structure of credit recipients. The share of credits extended to the private sector in total crown deposits , increased by 4.3 percentage points to a total of 56.8% over nine months. Private non-financial institutions in particular rank among the most significant recipients.
5) Changes in the allocation of credits to specific industries have been influenced by the ongoing economic restructuring, the development of the private sector, the sales and financial situation of firms and, all the more significantly, by the development of alternative forms of financing (credits drawn abroad, obtaining financial means through bond issues). In the first nine months, credits increased most rapidly in trade, sales, restaurants and accommodation (by 18.0%), transport, storage, tourism and telecommunications (by 16.9%), construction and building industries (by 11.4%), the processing industry (by 8.9%). In the processing industry the highest increase was recorded by the food industry (23.3%). A decline of credits occurred in agriculture, hunting and fishing (by 9.5%), mining of raw materials (by 1.7%), production and delivery of electric power, gas and water and in the chemical and pharmaceutical industries (by 2.4%).
6) Credits to privatisation play a significant role in property transformation, especially in small-scale privatisation. The development of their structure affects the termination of small-scale privatisation and the continuation of large-scale privatisation. Given the restricted possibilities for long-term resources needed for large-scale privatisation, participation of banks in large-scale privatisation is weaker (in terms of property privatised) than was the case in small-scale privatisation. The shift of privatisation processes to large-scale privatisation is reflected by the growing portion of long-term credits (by 17.8 percentage points in nine months) and the decline in medium-term (by 17.7 percentage points) and short-term (by 0.1 percentage point) credits of the total credits to privatisation. The share of long-term credits amounts to half of all privatisation credits, exceeding medium-term credits by the end of Q3.
7) Short-term credits prevail in the time structure of credits to the enterprise sector. From a long term point of view, there is a marked tendency to reduce the share of long-term credits in favour of short and medium-term credits. This can be attributed to a higher increase in short-term credits, which is documented also by newly extended credits, where short-term credits dominate (of the total increase in newly granted credits over nine months this year, 3/4 were short-term credits). This is due to an accumulation of factors by both enterprises and banks (the limited long-term resources of banks and their precaution with regard to further potential risky credits, the quality of projects presented when applying for a credit, the unclear future of enterprises, the level of management etc.).
Due to problems of some banks at the year-beginning, increased attention was paid to the quality of some commercial banks' portfolios, particularly to the volume of risky credits. This problem relates to both the state and private sectors. Besides the fact that this partially involves leftovers from the past economic system, the growth of risky credits is also connected to the lack of experience of newly established banks and the formation of a private sector. In July this year, the CNB established principles of credit classification, creation of reserves and provisions for these loans. The growth of these risky credits accelerated following the implementation of the new classification.
The volume of loans granted to households fell by CZK 2.5 bn, compared to the end of 1993. The lower number of long-term loans, a key item of loans extended to households, is causing the downward trend (so called "social loans" granted by a savings bank for flat construction were halted and the limit for loans to newly married couples reduced to CZK 10 thousand).