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Eurozone credit standards tightened more than expected by banks across all loan categories in Q3 according to the European Central Bank's latest Bank Lending Survey.
Demand for loans by both firms and households continued to decrease strongly, the survey showed, pointing to "ongoing central bank balance sheet reduction contributing to the tighter lending conditions". According to the closely-watched survey, which will discussed at Thursday's Governing Council meeting, the positive impact of policy rate hikes on net interest margins is expected to gradually abate.
“Cumulative net tightening since 2022 has been substantial, which is consistent with the ongoing significant weakening in lending dynamics,” the report said.
The net percentage of banks reporting a tightening moderated slightly compared with the previous quarter but was slightly higher than banks had expected in the previous quarter, the ECB said. (see table) Banks also reported a further net tightening of their credit standards for loans to households for house purchase and consumer credit and other lending to households (net percentages of 11% and 16% respectively). In both cases this strongly exceeded previous expectations
Source: ECB
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.