Financial News: Eurozone Lenders To Tighten Credit Standards For Loans

Eurozone Lenders To Tighten Credit Standards For Loans To Firms, Demand To Fall - ECB

04/09/2024 - 07:15:00 (RTTNews)

(RTTNews) - Eurozone lenders intend to tighten conditions for loans to firms in the second quarter and they expect a fall in demand for loans from enterprises, the bank lending survey results from the European Central Bank showed on Tuesday.

Lenders plan to moderately tighten credit standards for loans to firms and maintain credit standards for loans to households in the second quarter.

There was a small net tightening of credit standards for loans to enterprises in the first quarter.

For the first time since the fourth quarter of 2021, banks moderately eased the standards for loans to households for house purchase. Meanwhile, credit standards for consumer credit and other lending to households were tightened further in the first quarter.

The survey showed a substantial decrease in demand from firms for loans or drawing of credit lines, in contrast to bank expectations of a recovery.

Demand for housing loans posted a small drop, while demand for consumer credit and other lending to households remained broadly stable in the first quarter.

The fall in demand largely caused by higher interest rates, lower fixed investment for firms and lower consumer confidence for households.

Banks now forecast a moderate fall in demand for loans to firms and a net increase in demand for loans to households in the second quarter of 2024.

Expectations for the second quarter moderated a bit suggesting that the bank lending environment is set to remain very subdued in the coming months, ING economist Bert Colijn said.

The economist observed that tight monetary policy is still having a restrictive effect.

The survey revealed that ongoing central bank balance sheet reduction continued to exert tightening pressure.

The survey was conducted between February 29 and March 15. A total of 157 banks were surveyed, with a response rate of 100 percent.

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