Analysis of Credit Growth Determinants in the European Countries

The main function of banks is to facilitate the better functioning of lending activity, helping to improve efficiency and rational distribution of resources between different entities. If credit is used to purchase productive resources, this will help economic growth. The overall development of credits is usually based on a combination of factors that simultaneously impact the demand and supply of bank credit. Using a qualitative and quantitative analysis, the main objective of this paper is to establish the analysis of the evolution and determinants of credit activities, especially of the factors that have an impact on credit growth. Also, this paper will analyze the effects that the current pandemic has brought to the European banking sector in general and in particular to the credit activity. The results showed that economic growth, credit quality, financial intermediation rate, along with foreign and domestic funding sources are the main determinants of credit growth.