4  BIS Review 20/2010  In the third quarter of 2009 the ratio of new bad debts to outstanding loans to firms was above 3 per cent, its highest value in ten years. According to preliminary estimates, the deterioration in loan quality continued in the last part of the year, probably depressing banks’ results for the fourth quarter.
The increase in substandard loans and past due instalments points to a further deterioration in the months to come. The priority use of the profits earned must be to strengthen banks’ capital bases. Credit In December the total stock of outstanding bank loans was 0.7 per cent lower than a year earlier.