BIS Review 52/2010  1  Several factors are contributing to the reduced supply of bank loans. For instance, in response to an increase in the number of delinquent and nonperforming loans, many banks have reduced existing lines of credit sharply and have tightened their standards and terms for new credit.
In other cases, banks whose capital has been eroded by losses or who have limited access to capital markets may be reducing risk assets to improve their capital positions, especially amid continued uncertainty about the economic outlook and possible future loan losses. But the reduction in the availability of credit is not the whole story.