Banks pull the leash on loans

Many smaller and medium-sized businesses are starting to be stung by tighter credit conditions imposed by banks. One of the industries to first feel the effect of bank tightening has been automotive parts. In the public company arena, the profit downgrades by Pacifica and Repco were surface manifestations of a deeper problem. Industry sources say big banks have suddenly become nervous now that General Motors' US debt securities have been classified as “junk” and Ford also has problems. In the retail sector, the downturn by smaller retailers such as JB Hi-Fi, Rebel Sport, Flight Centre and Just Jeans has been duplicated over a much wider canvas and banks have responded accordingly.

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