ECB Says APP Facilitates Easing of Credit Terms and Conditions

By Christian Vits

     FRANKFURT (MNI) - The European Central Bank's asset purchase program

continues to have a positive impact on financing conditions of banks in the

currency bloc, though it is depressing profits, the bank reported in its latest

bank lending survey.

     "Banks continued to report a positive impact on their liquidity position

and market financing conditions over the past six months, but a negative impact

on their net interest margins," the ECB said Tuesday. 

     Responding banks indicated that they had mainly used the additional

liquidity related to the APP to grant loans. According to the report, the net

easing impact of the APP continued to be stronger for terms and conditions than

for credit standards.

     The ECB's negative deposit facility rate, while having an adverse impact on

banks' net interest income, is assessed by banks to have had a positive impact

on their lending volumes, the ECB said.

     "Competitive pressure, banks' risk perceptions, and cost of funds and

balance sheet constraints had an easing impact on credit standards on loans to

enterprises, while banks' risk tolerance had a tightening impact," the ECB

outlined. Overall, credit standards for loans to enterprises remained broadly

unchanged.

     Credit standards on loans to households for house purchases eased further

and stronger than expectations expressed in the previous survey round, while

those on consumer credit and other lending to households eased "in line with

expectations", the ECB said.

     For the fourth quarter of 2017, banks expect credit standards on loans to

enterprises to remain unchanged, while they anticipate a net easing for housing

loans (-3 percent) and consumer credit (-2 percent), according to the ECB.

     Net demand continued to rise across all loan categories. "The increase in

fixed investment and the general level of interest rates were important factors

boosting demand for loans to enterprises in the third quarter of 2017," the ECB

noted.

--MNI Frankfurt Bureau; +49 69 97782671; email: christian.vits@marketnews.com