In the current economic climate, bank lending to firms has continued to grow: in the twelve months ending in September, it accelerated to 4 per cent, from 1 per cent in January 2022, partly as a result of the higher costs associated with the energy shock.
In order to maintain sound balance sheets, banks need to manage rising credit risks carefully, including through regular provisions. They can thus avoid the inevitable tightening of credit supply conditions associated with the increasing riskiness of borrowers, early signs of which are already visible, turning into a severe credit crunch.