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ECB: Schnabel's Comments On Q4 BLS Ignore Tightening In Standards

ECB
BundesbankCentral Bank NewsFixed Income BulletsCEEMEAEurozoneGermanyBulletMarketsEuropean Central BankForeign Exchange Bullets

Schnabel highlighted signals of increasing loan demand from the latest Bank Lending Survey (BLS) as evidence that ECB easing is being transmitted to the real economy. Meanwhile, she did not make reference to the tightening of lending standards reported in the same survey.

  • Even if rate cuts are feeding through into increased loan demand, tighter standards amongst banks will limit the pass through of that demand into the real economy. All else equal, this suggests a more restrictive policy stance than implied by loan demand alone.
  • Relevant excerpts from Schnabel’s interview: “For corporate loans, 90% of banks said in the most recent round that the general level of interest rates has no impact on loan demand, while 8% said it has lifted credit demand”….”It’s even clearer when you look at mortgages. Almost half of banks said in the most recent round that the general level of interest rates is supporting loan demand.” 
  • ECB Chief Economist Lane noted on Feb 5 that this tightening of standards was “driven by the fact that banks see higher risks to the economic outlook and have lower tolerance for taking on credit risk”. 
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Schnabel highlighted signals of increasing loan demand from the latest Bank Lending Survey (BLS) as evidence that ECB easing is being transmitted to the real economy. Meanwhile, she did not make reference to the tightening of lending standards reported in the same survey.

  • Even if rate cuts are feeding through into increased loan demand, tighter standards amongst banks will limit the pass through of that demand into the real economy. All else equal, this suggests a more restrictive policy stance than implied by loan demand alone.
  • Relevant excerpts from Schnabel’s interview: “For corporate loans, 90% of banks said in the most recent round that the general level of interest rates has no impact on loan demand, while 8% said it has lifted credit demand”….”It’s even clearer when you look at mortgages. Almost half of banks said in the most recent round that the general level of interest rates is supporting loan demand.” 
  • ECB Chief Economist Lane noted on Feb 5 that this tightening of standards was “driven by the fact that banks see higher risks to the economic outlook and have lower tolerance for taking on credit risk”.