Credit cycle

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-01

// THE SHORT ANSWER

The credit cycle is the swing in how freely banks lend: terms loosen while losses are low and competition for borrowers is high, borrowers take on more debt on easier terms, losses rise, terms tighten, and the cycle turns. It runs alongside the economic cycle but is not the same thing — credit can be loose in a flat economy and tight in a growing one. The loans that go wrong are written near the top, when the last few years of low losses make every file look safe; the best are often written near the bottom, when few banks are lending at all.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.