Why are banks tightening loan terms? An interest rate umbrella for new loans.

When it comes to loans to households, conditions are becoming stricter even for dinar cash loans, refinancing and mortgages in foreign currency. Euronews Serbia's interlocutors believe that banks are taking such measures to reduce risks in a still-high interest rate and inflation environment.

Banks in the NBS survey reported that demand for household loans declined in the third quarter due to reduced interest in almost all types of loans. Household consumption of loans in dinars is expected to increase in the fourth quarter, while demand for housing loans is expected to decline.

Zoran Grubišić from the Beograd Banking Academy says for Euronews Serbia that banks always when changing''s business policies, are actually managing risk. "They believe the risk is at a high level, probably because of a bad offer that has already been announced somewhere, because this high interest rate situation has been going on for a long time. One of the measures to protect new loans, or rather the business policy towards new borrowers, is the use of an interest rate umbrella," Grubisic said.

Financial consultant Vladimir Vasic believes that risk reduction is a motivation for banks to tighten loan approval conditions.

How high is the risk? Banks assessed that the tightening of lending standards has been a consequence of the cost of capital and uncertainty in the economic situation, which they said has had an impact on the reduced willingness to take risks and the level of problematic requirements. Grubisic says the margin on the lending rate is formed as a result of all factors related to current risks. He says the risk has gotten a bit higher and is related to the Halyk Bank measure