MNI BRIEF: Eurozone Credit Standards Tightened in Q4 2020

Credit standards for loans to businesses and households have tightened, while firms demand for bank funds has also declined, according to the European Central Bank's January euro area bank lending survey, with government guarantees continuing to play a key role in supporting favourable financing conditions. Around a quarter of banks surveyed reported tighter credit standards for loans or credit lines to enterprises, with more stringent collateral requirements and wider loan margins, especially for riskier loans. Some 7% reported tougher standards for house purchases, compared with 3% for consumer credit and other household lending.

Demand for inventories and working capital contributed to an increase in demand, but demand for loans for fixed investment declined for the fourth consecutive quarter in Q4 2020. Non-performing loans (NPLs) had a tightening impact on credit standards and on terms as well as on terms and conditions for loans to enterprises and consumer credit, banks reported, though their impact on housing loans was broadly neutral.