Has the Financial Crisis Induced a Credit Crunch for Small and Medium-Sized Enterprises in Germany?

Hat die Finanzkrise zu einer Kreditklemme für KMU in Deutschland geführt?

Master's Thesis , 2009 , 94 Pages , Grade: 1,3

Business economics - Miscellaneous

The following MBA-Thesis analyses how the financial crisis has affected different pre-conditions for the credit lending behaviour of banks. Additionally the demand for loans of potential borrowers will be considered. A “credit crunch” is defined as a restriction of the credit supply which leads to a mismatch of supply and demand.
It will be shown that the financial crisis caused a still ongoing macroeconomic contraction. The macroeconomic contraction has a direct effect on the calculation of rating grades which downgrade. Parameters of credit risk assessments will be analysed and their pro-cyclicality will be tested. Corporate rating grades already downgraded significantly in 2008.
The downgrading of firms has an effect on the credit pricing which influences also the credit demand. This effect will be shown by explaining a basic cost-plus loan pricing model. The sensitivity of the loan pricing towards changes of attributed capital, refinancing costs and cost of default will be exemplarily shown. It will be shown that the rating downgrades have a significant effect on the credit price. This price increase which might affect the demand is however per definition not a “credit crunch”.
The Basel II Accord regulation links the requirements for banks’ capital to rating grades. Prior to the financial crisis the capital of banks has already been close to the regulatory minimum level. This made the banks vulnerable for impairments on assets. As new sources for capitalisation and possibilities to off-balance assets are currently limited banks have to reduce risk-weighted assets to fulfil the minimum capital requirements.
A reduction of risk-weighted assets could be inter alia done by a restrictive corporate lending policy. The restrictions on banks’ capital will not decrease quickly as especially impairments on the credit book might increase due to upcoming defaults.
Nevertheless a supply restriction gets only visible if the demand for credits is robust. The demand correlates among other points especially to the investments which have decreased since the end of 2008.

Inhaltsverzeichnis

• TABLE OF FIGURES
• TABLE OF SYMBOLS
• TABLE OF ABBREVIATIONS
• ABSTRACT
• 1 INTRODUCTION
  • 1.1 DESCRIPTION OF THE PROBLEM AND COURSE OF THE THESIS
  • 1.2 FRAMEWORK
    • 1.2.1 FINANCIAL CRISIS
    • 1.2.2 CREDIT RATIONING AND IS-LM AS THEORETICAL MODELS
    • 1.2.3 SMALL AND MEDIUM-SIZED ENTERPRISES IN GERMANY
    • 1.2.4 GERMAN CREDIT BANKING SYSTEM
• 2 IMPACTS ON THE CORPORATE CREDIT DEMAND AND SUPPLY
  • 2.1 DEMAND SIDE
    • 2.1.1 BASEL 2, RATINGS AND REQUIRED CAPITAL ATTRIBUTION
    • 2.1.2 MACROECONOMIC CONTRACTION AND DEVELOPMENT OF RATINGS
    • 2.1.3 MACROECONOMIC CONTRACTION AND BORROWERS' BALANCE SHEETS
    • 2.1.4 OTHER FACTORS THAT INFLUENCE - A LOAN PRICING MODEL
  • 2.2 SUPPLY SIDE
    • 2.2.1 AVAILABLE ECONOMIC CAPITAL
    • 2.2.2 SECURIZATION OF BANK LOANS
    • 2.2.3 ALTERNATIVE DEMAND AND MONETARY POLICY
• 3 EVIDENCE OF A CREDIT CRUNCH IN GERMANY
  • 3.1 DEVELOPMENT OF THE TOTAL LENDING VOLUME IN GERMANY
  • 3.2 ANALYSIS ON THE BASIS OF THE ECB BANK LENDING SURVEY
• 4 CONCLUSION
• BIBLIOGRAPHY
• APPENDIX

Zielsetzung und Themenschwerpunkte

This MBA thesis examines the impact of the financial crisis on the credit market for small and medium-sized enterprises (SMEs) in Germany. The thesis aims to investigate whether the crisis has induced a credit crunch for SMEs, leading to a reduction in credit availability and an increase in borrowing costs. The study analyzes the factors influencing both the demand and supply sides of the credit market, considering the role of Basel II regulations, macroeconomic conditions, and the German banking system.

• The impact of the financial crisis on the credit market for SMEs in Germany
• The role of Basel II regulations in shaping credit demand and supply
• The influence of macroeconomic factors on credit availability and borrowing costs
• The characteristics of the German credit banking system and its response to the crisis
• Evidence of a credit crunch in Germany, based on lending volume data and ECB surveys

Zusammenfassung der Kapitel

The first chapter introduces the research question and outlines the framework of the thesis. It defines the financial crisis, credit rationing, and the IS-LM model as theoretical frameworks. It also provides an overview of SMEs in Germany and the German credit banking system.

Chapter two analyzes the impacts of the financial crisis on the corporate credit demand and supply. It examines the demand side, focusing on Basel II regulations, rating agencies, and macroeconomic conditions. The chapter also explores the supply side, considering available economic capital, securitization of bank loans, and alternative demand and monetary policy measures.

Chapter three presents evidence of a credit crunch in Germany, analyzing the development of the total lending volume and the results of the ECB Bank Lending Survey.

Schlüsselwörter

The keywords and focus themes of the text encompass the financial crisis, credit crunch, small and medium-sized enterprises (SMEs), Germany, Basel II regulations, credit rationing, macroeconomic conditions, lending volume, and the German banking system. The thesis investigates the impact of the financial crisis on the credit market for SMEs in Germany, analyzing the factors influencing both the demand and supply sides of the credit market.

• College: Otto Beisheim School of Management Vallendar
• Grade: 1,3
• Author: Christopher Heine (Author)
• Publication Year: 2009
• Pages: 94
• Catalog Number: V132485
• ISBN (eBook): 9783640382170
• ISBN (Book): 9783640382286
• Language: English
• Tags: Kreditklemme, Credit Crunch, Finanzkrise, KMU, SME, Kreditgeschäft, Bankwesen, Banking, Financial Crisis, Restructuring, Credit, Loans, Restrukturierung