The present state of the credit market is a well-known case in the economic literature: a situation in which uncertain economic outlook, high default risk and difficulty of assessing the soundness of individual borrowers generate adverse selection and heighten banks’ risk aversion, prompting restrictive lending policies.1 Unlike the pattern seen in the past, the  1  J. Stiglitz and A. Weiss, “Credit Rationing in Markets with Imperfect Information”, The American Economic Review (1981).
BIS central bankers’ speeches  1  reduced availability of credit is also affecting, albeit to a lesser extent, large firms and firms with balanced financial positions. The credit market will continue to experience supply-side tensions in the months to come. Past experience has shown that loan quality tends to continue deteriorating long after the cyclical upswing has begun.