Eurozone lenders tightened their credit conditions for households and firms in the second quarter amid high uncertainty and rising prices, the bank lending survey from the European Central Bank showed on Tuesday.
Regarding loans to households for house purchases, banks reported a strong net tightening of credit standards, while credit standards for consumer credit and other lending to households were tightened moderately.
Credit standards for loans to firms were also tightened in the second quarter citing perceptions of increased risk and lower risk tolerance.
As monetary policy is becoming less accommodative, lenders reported that their cost of funds and balance sheet constraints had contributed to the tightening of credit standards for loans to firms and households in the second quarter.
For the third quarter, they expect a net tightening of credit standards for loans to firms of a similar magnitude to that in the second quarter. In addition, credit standards are set to continue to tighten for both housing loans and consumer credit.
The survey also showed that firms’ demand for loans continued to increase, driven by working capital needs. Meanwhile, net demand for housing loans fell after increasing in the first quarter, and demand for consumer credit and other lending to households continued to rise in net terms.
Lenders forecast a net decrease in firms’ demand for loans, a strong net decrease in demand for housing loans and broadly unchanged demand for consumer credit in the third quarter.
The July bank lending survey was conducted between June 10 and 28. A total of 153 banks were surveyed in this round of survey.