ECB BLS: Credit Standards for Loans to Firms, Consumer Credit Stable or Tighter in 3Q

15 October 2024

By Marta Vilar – The European Central Bank’s latest Bank Lending Survey, released on Tuesday, showed that recent interest rate cuts did not ease credit standards for loans to enterprises and consumer credit in the Eurozone in 3Q24.

‘[E]uro area banks reported unchanged credit standards … for loans or credit lines to enterprises in the third quarter of 2024', said the ECB in a press release.

In the previous survey, banks had projected some easing here, but risk perceptions continued to have a slightly restrictive impact, according to the ECB.

Meanwhile, consumer credit standards tightened more than expected, primarily due to ‘additional perceived risks’, the Bank Lending Survey showed. Easing of credit standards for loans to households for house purchases was stronger than projected at -3%.

The survey results project net tightening of credit standards for loans to firms and consumer credit in 4Q24, but net easing for households, according to the ECB.

‘Banks’ overall terms and conditions – the actual terms and conditions agreed in loan contracts – eased strongly for housing loans and slightly for loans to firms, while moderating for consumer credit’, the ECB said.

The firms surveyed registered a slight net increase in demand from firms for loans for the first time in two years, according to the report.

The ECB said that demand for housing loans reported a strong uptick, while a weaker increase was seen in demand for consumer credit.

‘The reduction in the ECB’s monetary policy asset portfolio had a slightly negative impact on euro area banks’ market financing conditions over the last six months, which banks expect to continue over the next six months’, the press release said.

Banks registered the first negative effect of interest rate moves on their net interest margins since end-2022, the BLS showed. These firms expect this negative impact to worsen and to push down banks’ profits.