In the second quarter, the banks of the euro zone “considerably tightened” the criteria for granting their loans or lines of credit to companies and carried out “a markedly strong tightening of the credit criteria” for the granting of real estate loans. , while facing the third quarter, the entities expect a net tightening of the granting criteria of a similar magnitude to that of the second quarter.
According to the Bank Lending Survey, conducted by the European Central Bank (ECB) between June 10 and 28 with the participation of 153 banks, internal guidelines or bank approval criteria for loans or credit lines business credit they tightened considerably during the second quarter.
As regards loans to households for housing, euro area banks experienced a sharp net tightening of credit standards, while criteria for consumer credit and other loans to households tightened moderately .
Consultees cited greater risk perception and lower risk tolerance, in the current environment of high uncertainty, continued supply chain disruptions, and high energy and input prices, such as factors behind the marked tightening of standards. .
In addition, as monetary policy became less accommodative, euro area banks also reported that constraints on their cost of funds and balance sheets had contributed to tightening standards for lending to businesses and households. .
Looking ahead to the third quarter, the entities expect a net tightening of corporate lending standards “of a similar magnitude to the second quarter”, while anticipating that lending standards will continue to tighten. harden both for real estate loans and for consumer loans. loans.
On the other hand, banks reported an increase in demand for corporate loans or lines of credit in the second quarter, driven by corporate financing needs for working capital, which is likely linked to rising energy and commodity prices in the context of continued supply chain disruptions, while fixed investment has had a dampening effect on net demand for corporate finance, indicating that they could postpone their investments in the current uncertain environment.
In addition, in the second quarter, net demand for loans for housing fell after increasing in the first quarter, while demand for consumer credit and other loans to households continued to increase in net terms.
As explained by the ECB, the net fall in demand for loans for house purchase was mainly due to the drop in consumer confidence and the general level of interest rates, while the increase in demand for loans for consumption was mainly due to spending on durable goods.
For the third quarter, banks expect a net decline in demand for business loans, a sharp net decline in demand for mortgages and consumer credit demand virtually unchanged.