TORONTO, ONTARIO -- (Marketwired) -- 07/04/13 -- Canada's nine largest banks have increased the amount of credit available to businesses in Canada since the beginning of the global financial crisis, according to data released today by the Canadian Bankers Association (CBA). In a new report, Banks Increasing Credit to Businesses in Canada, the CBA has compared data on credit authorized to businesses by Canadian banks to credit outstandings, or the amount of money that businesses have actually borrowed from the credit authorized to them.
"By comparing the business credit authorized to the credit outstandings, we can get a much clearer picture of how banks have been supporting businesses and, by extension, the broader economy in recent years," said Marion Wrobel, Vice President, Policy and Operations, at the Canadian Bankers Association.
The report found that, since the beginning of 2007, credit authorized by banks to businesses increased by 29 per cent, and credit outstandings grew by 35 per cent. In contrast, the Canadian economy only grew by 22 per cent in the same time period. And, since 2010, bank credit authorized has increased for each sector of the economy.
These statistics provide further evidence of the Bank of Canada's recent observation that the supply and price of credit for businesses in Canada remains very stimulative, providing ongoing support for economic expansion.(1)
Canada's sound banks are able to raise funds from depositors, bondholders and shareholders and that strength enabled banks to continue lending to households and businesses, limiting the impact of the recent recession and aiding with the economic recovery in Canada.
"We've seen a real shift in lending from households to businesses," said Mr. Wrobel. "Throughout the financial crisis and the period of economic recovery, household borrowing provided the foundation for Canada's economic growth, but that changed in late 2012 when the growth rate of business credit surpassed that of household borrowing."
"Business confidence is gradually improving, and Canadian businesses are in a better position to take advantage of the growing pool of credit to expand their operations, hire workers and grow their profits. In fact, businesses had more than $500 billion of unused credit available to them at the end of 2012," he added.
Small Business Lending Also Growing
The report also found that bank lending to small and medium-sized enterprises (SMEs) has been a source of stability throughout the economic crisis and economic recovery. As of 2012, SMEs had $71 billion of unused credit available to them, up from $61 billion in 2007.
A recent Industry Canada survey(2) found that SMEs ranked obtaining financing as one of the least problematic external obstacles to growth behind things such as rising costs of inputs, government regulations, a shortage of labour and other factors. According to the study, close to 90 per cent of SMEs had their debt financing request fully or partially approved in 2011 with less than eight per cent reporting that it was rejected.
Accessing the CBA Report
The CBA report, Banks Increasing Credit to Businesses in Canada, is available on the CBA website at: http://www.cba.ca/contents/files/submissions/msc_20130704_cba_business_credit_report_en.pdf
About the Canadian Bankers Association
The Canadian Bankers Association works on behalf of 55 domestic banks, foreign bank subsidiaries and foreign bank branches operating in Canada and their 275,000 employees. The CBA advocates for effective public policies that contribute to a sound, successful banking system that benefits Canadians and Canada's economy. The Association also promotes financial literacy to help Canadians make informed financial decisions and works with banks and law enforcement to help protect customers against financial crime and promote fraud awareness. www.cba.ca
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(1) Bank of Canada, Monetary Policy Report, April 2013, page 18(2) Industry Canada, Survey on Financing and Growth of Small and Medium Enterprises, February 2013
Canadian Bankers Association
(416) 362-6093, ext. 338
Cell: (416) 918-2777