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Financial News: Eurozone Business Loan Credit Standards Tightened In Q2

Eurozone Business Loan Credit Standards Tightened In Q2 On Uncertain Outlook

07/23/2019 - 09:37:00 (RTTNews)

(RTTNews) - Euro area banks unexpectedly tightened the conditions that business firms should meet to get loans during the second quarter, due to an uncertain economic outlook, results of a quarterly survey by the European Central Bank showed on Tuesday. By contrast, banks had expected credit standards to ease in the second quarter during the previous survey.

These are set to remain unchanged in the three months to September, the latest Bank Lending Survey from the ECB showed.

Despite tighter credit standards, banks expect the demand for business loans to rise in the third quarter, thanks to low level of interest rates. In the second quarter, demand for business loans grew in Italy, Germany and France, supported by fixed investment. Demand eased in Spain and the Netherlands. The latest tightening in credit standards for loans to enterprises marked the end of the net easing period that began in 2014, the ECB said. While credit standards for loans to small and medium-sized enterprises, those for large firms were broadly unchanged. Banks' risk perceptions and risk tolerance, as well as cost of funds and balance sheet constraints, contributed to a tightening of credit standards on loans to enterprises, while competition exerted pressure in the opposite direction, the ECB report said. After tightening in the first quarter, credit standards on home loans remained broadly unchanged in the three months to June, defying expectations for further tightening. Banks in Germany, France and the Netherlands eased credit standards for home loans, while those in Italy left them unchanged and those in Spain tightened them. Credit standards for housing loans are expected to remain broadly unchanged in the third quarter, the survey said. Demand for housing loans increased in the second quarter and is expected to continue to rise in the three months to September. Eurozone banks further tightened the credit standards for consumer credit and other lending to households during the second quarter. Significant tightening was logged in Spain, mainly due to a stricter stance adopted by banks. Going forward, euro area banks expect to an easing in credit standards on consumer credit in the third quarter. Demand for consumer credit increased in the second quarter and is expected to rise further in the third quarter to a level closer to that reported on average between 2014 and 2019.

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