credit crunch

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Credit crunch

A shortage of available credit for businesses and consumers. This situation could arise when lenders are reluctant to lend because of uncertainty of defaults or are willing to lend only at high interest rates thus making it difficult for businesses and consumers to secure credit. The term became popular the financial crisis that began in 2007 when a large number of homeowners either defaulted or were expected to default on mortgages, leading to great stress on the market in which these securitized loans were traded. The ensuing constriction in liquidity caused lenders to cut back on loans resulting in a credit crunch.

credit crunch

A period during which borrowed funds are difficult to obtain and, even if funds can be found, interest rates are very high. Credit crunches were particularly severe before 1980 when the ceilings on interest rates that financial institutions could pay resulted in a drying up of deposits.
References in periodicals archive ?
However, if direct borrowers have access to more credit, the duration of the year-end liquidity squeeze should be shorter for them than other borrowers.
If investors know that a liquidity squeeze is no longer possible, they will refrain from speculative attacks on solvent countries.
As soon as the Fed had achieved its inflation-fighting goal, however, it would end the liquidity squeeze.
Oputu reiterated that the N200 billion fund was to tackle the prevailing liquidity squeeze so as to provide credit access to operators for the restructuring of moribund factories, among others.
His colleague Ewald Nowotny said the ECB was committed to offering extra funds to ensure there is no liquidity squeeze.
8 April 2010 - Greece's four biggest banks are asking for government support to help them weather the liquidity squeeze prompted by the massive deposit outflow in the first two months of 2010, the Financial Times reported Thursday.
The company chairman and chief executive officer, Micki Hidayatallah, said, 'The worldwide economic downturn, the decrease in natural gas prices in the US, and the impact of the credit and liquidity squeeze on our customers resulted in the US rig count dropping by 52% as of June 30, 2009 compared to June 30, 2008.
Fourth quarter sales slowed significantly as a result of the onset of the global economic downturn and the subsequent liquidity squeeze," the company.
The bank said a liquidity squeeze in the market was expected to continue in the coming three to four months with occasional spikes.
Privately-held Saad Group sent shockwaves through the Gulf on Monday, saying it plans to restructure the debt of its units hurt by a liquidity squeeze brought on by the financial crisis as ratings agency Moody's cut its ratings on the group to junk.
Considering the current global liquidity squeeze, we have recognized the need to for investors to get better returns on their investment,Eoe1/4Y said Mohamed Amiri, Head of Retail Banking, Dubai Bank.