Easy money: Mittelstand lending glut sparks credit risk fears

In Germany, every bank wants to lend to the Mittelstand, but demand for credit is modest. As a result, interest rates on loans are falling, and some see a danger of bad lending practices making a comeback. Michael Watt reports

They were the bad old days. Distressed debt funds descended on Germany in 2003 and 2004, drawn by estimates that the country’s banks were sitting on €300 billion in non-performing loans; growth was stagnant; unemployment hit a post-war record in 2005. Behind it all, according to risk managers at the country’s listed commercial banks, was a lending market that made it impossible for them to compete on sensible terms – a market in which the Landesbanks were able to use their state-backed status to