A comparative analysis of the US and EU retail banking markets - Wsbi

5.3.1.2.3 Loan composition
For most of the countries of the Eurozone represented
in graph 10, loans to households represented the
greater proportion of lending to the private sector in
2004, with the exception of Austria, Greece, Italy
and Luxembourg, where more lending was done to
businesses than private households. Housing loans
represents the bulk of outstanding credit to households
in Europe. For the Eurozone as a whole in 2004,
55% of all private lending was household lending,
while the rest was lending to business. Of household
lending in 2004, 68% was home lending, while
14% was consumer credit. However, the share of
housing lending to total household lending varies
from country to country in the Eurozone, representing
between 40% and close to 90% in 2004 (See table
K in table annex for figures). Note that these figures
include all private sector lending, and therefore not
just lending by credit institutions.
5.3.1.3 Comparison
In the US non-bank deposits have grown significantly
less fast (5% a year on average) than other types of
liabilities which make up important proportions of
total liabilities such as ‘other borrowed funds’ (14%
a year average growth) or other types of deposits
(8% a year). In the EU, growth of non-bank deposits
of 7% a year has been equivalent to growth in the
next biggest form of liability, interbank deposits.
One could conclude that bank intermediation is
consistently stronger in the EU than the US, as
evidenced too by the higher proportions of deposits
to GDP in the EU (93%) compared to the US (38%).
Also, if we compare the proportion of stock capital
market to GDP for both the EU and the US, we see
that it is indeed much more important in the US
(155%) than the EU (100%).
On the asset side, loans have continued to represent
by far the main assets to credit institutions in both
the US and the EU, remaining a stable use of funds
in both markets over the years. In Europe, the ratio
of bank loans to the private sector to GDP is larger
(94%) than in the US (49%). For both the EU and
the US, the ratio of bank loans to the private sector
to GDP has grown quite significantly between 1980
and 2000 (increasing from 60% to 93.7% in the EU
and from 35% to 49% in the US).
In terms of loan compositions, home loans represent
much the greater proportion of total loans of both
US and EU financial institutions 253 . There are some
exceptions in several countries in Europe, where loans
to businesses exceed home loans. In comparison in
2004, 88% of all lending to households in the US
was home lending while 9% was consumer lending.
The equivalent average figures for Europe are 68%
and 14%, though with the share of housing lending
to total household lending varying from country to
country between 40% and close to 90% in 2004.
Assessing the evolution of non-bank deposits over
time in proportion to total assets reveals that deposits
in the US have become a less important source of
funds for US credit institutions. In Europe, non-bank
deposits have also contributed less of the funding,
but the decrease over the same period has not been
as significant as in the US. This in spite of the fact
that market based funding has grown significantly
in Europe in the last two or so decades, as can be
evidenced by the significant increases in the proportion
of stock market funding and equity issues to GDP
(especially) for continental Europe between 1980
and 1990.
253 Comparable US and EU data on lending to the private sector by credit institutions only is unfortunately not available.
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