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Credit Crisis in View of Return on Loan

Author

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  • Luboš Smrčka

Abstract

The paper sums up various data from the Czech economy concerning the issue of the current so-called credit crisis, i.e. the situation when financial institutions are lending money to businesses only with a considerable amount of distrust and much more prudence than in the past. Based on specific figures, the author proves that the banks' unwillingness to lend stems especially from the state of demand in the local economy and among foreign customers, and from the fact that the ratio of default loans to the total number of loans has been increasing in the long term, threatening the stability of banks. Apart form other issues, however, the author sees as the key factor the decreasing gross value added to one crown of credit provided to businesses. Moreover, on the figures from the Czech Statistical Office, he proves that this process had started even before the outbreak of the crisis of 2007 to 2010. In conclusion, he considers the irresponsible growth of costs in businesses and investment into projects with poor return to be decisive reasons for the drop in gross value added.

Suggested Citation

  • Luboš Smrčka, 2010. "Credit Crisis in View of Return on Loan," Ekonomika a Management, Prague University of Economics and Business, vol. 2010(2).
    • Handle: RePEc:prg:jnleam:v:2010:y:2010:i:2:id:93
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    References listed on IDEAS

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    1. Charles Goodhart & Pojanart Sunirand & Dimitrios Tsomocos, 2006. "A model to analyse financial fragility," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 27(1), pages 107-142, January.
    2. Dimitrios P. Tsomocos, 2012. "Equilibrium Analysis, Banking and Financial Instability," Chapters, in: The Challenge of Financial Stability, chapter 4, pages 61-97, Edward Elgar Publishing.
    3. Goodhart, Charles A. E. & Sunirand, Pojanart & Tsomocos, Dimitrios P., 2004. "A model to analyse financial fragility: applications," Journal of Financial Stability, Elsevier, vol. 1(1), pages 1-30, September.
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    More about this item

    Keywords

    úvěrová krize; hrubá přidaná hodnota; banky; Credit crisis; Gross value added; Banks;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises

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