A European Credit Risk Survey conducted by FICO and Efma shows that a "credit gap" looms for small businesses in 2012.
The survey, which queried credit risk management professionals in January and February, found that 71% of respondents across 31 European countries said small businesses will find it harder to get credit in 2012.
The survey also found the widest credit gap for small businesses since the survey was launched a year ago. Thirty-one percent of respondents say the aggregate amount of credit requested by small businesses will increase, while just 13% say the amount of credit extended will increase.
"The survey results show that credit demand across Europe will shrink, but supply will shrink even faster, particularly for small businesses," says Mike Gordon, FICO vice president for Europe, the Middle East and Africa. "It's notable that in the UK, which has had a tremendous focus on small business lending through such efforts as Project Merlin, our survey says the increases in demand and supply will be roughly equal, and half as many respondents, just 36%, say small businesses will find it harder to get credit."
Consumers also will find it harder to get credit in 2012, according to 61% of respondents. While a poor economic outlook may be part of the reason, risk professionals clearly pointed a finger at banking regulations. Seventy-eight percent of respondents said banking regulations will reduce credit availability. In the UK and Ireland, that percentage grew to a whopping 91%, the highest for any region in the survey.
"Unfortunately, regulations aimed at preventing another credit meltdown appear to be stunting the recovery," says Gordon. "Banks that need to hold ever-greater amounts of capital can't put as much credit on the street. In our work with banking clients across Europe, one of the top priorities is developing credit strategies that balance risk management with capital preservation and growth."
Participants in the fourth annual included credit-granting institutions ranging from local banks to global institutions. More than 100 representatives from 31 European countries and 79 companies responded to this survey.
Efma, a not-for-profit association formed in 1971 by bankers and insurers, specializes in retail financial marketing and distribution. More than 3,000 brands in 130 countries are Efma members, including over 80% of Europe's largest retail financial institutions.