Weak borrower balance sheets are also a deterrent to lending because they worsen credit risk and thus make the problems of adverse selection and moral hazard more prominent. The harmful effects of balance sheet deterioration were evident in recent months, when concerns about borrower financial positions caused lenders to demand a substantial premium on loans and even to drastically cut the flow of credit.
There is evidence and growing awareness among banks of the commercial potential of the remittances business. In Germany, competition in the financial sector ensures quite reasonable prices for remittance services, at least as far as sending costs are concerned.