To further gauge the negative link between EPU and lending to the private
sector, we focus on loan flows to households separately as well.
Our results point out that EPU by and large negatively correlates with retail loan
flows, too (except in Germany). With 24% in Italy, 28% in France and 32% in
Spain, the average negative link is evident. That said, the magnitude of
correlation is somewhat lower compared to loan flows to non-financial
corporations in Italy and Spain. This could be due to the fact that a large part of
the lending to households is mortgage lending (around 60% to 75%). Mortgage
loans are highly standardised and collateralised. They are thus usually less risky
than corporate loans and less affected by uncertainty.
In Germany, the average
correlation is a small positive, a somewhat surprising observation. We also
perform a regression analysis, which points out that a 10% increase in EPU can
translate into a reduction of up to EUR 500 m (as in the case of Spain) in
monthly bank loan flows to households.