Nevertheless, caution is warranted before reaching any conclusions on the likely effects of the financial market turmoil on the cost and availability of bank credit. The impact of the market turmoil on some banks’ balance sheets has been considerable and a number of credit institutions will have to strengthen their capital positions and be more cautious in their lending policies.
Moreover, the time lags in the effects of a change in credit standards by banks on loan demand imply that it could be some time before their cumulative impact becomes observable.