The CBC said the unpredictable outbreak of the pandemic in early 2021 seems to have significantly affected the demand for loans, both from households and businesses, overturning estimates for the first quarter of 2021, where during the January 2021 survey, banks expected an increase in demand in all categories of loans.

It said the increase in coronavirus cases at the end of 2020 and the strengthening of restrictive measures led to a decrease in demand for borrowing from both households (reduced consumption and increased deposits due to uncertainty about their future financial situation) and by companies (reduction in demand for fixed investments due to uncertainty about future economic prospects).

According to the CBC, despite the expectations to further impose stricter lending criteria for businesses, this did not happen, as it appears that banks’ risk perception and risk tolerance improved in the first quarter of 2021 compared to previous quarter.

The Central Bank said however that based on the banks’ expectations for the second quarter of 2021, the criteria for lending to businesses were expected to remain unchanged, while for households for all loan categories they were expected to become even stricter compared to the previous quarter.

Source: Cyprus Mail