Eurozone banks tightened access to credit in the second quarter of this year and might continue to tighten their lending standards in the current quarter since their risk tolerance has plunged, a European Central Bank (ECB) survey showed on July 19.
With Russia’s war in Ukraine thwarting confidence and dragging the entire bloc nearer to a recession, banks appear to have become quite picky in granting the loans that could eventually strengthen the downturn.
The ECB commented:
“Banks reported that risk perceptions related to the economic outlook, industry or firm-specific situation and banks’ decreased risk tolerance had a strong tightening impact on credit standards.”
In Q2 2022, credit demand from firms was up as the companies needed to continue financing investment. However, banks indicated a “considerable” further tightening of most of their credit standards.
In that context, the ECB added:
Buy Crypto Now“In the third quarter of 2022, euro area banks expect a net tightening of credit standards for loans to firms of a similar magnitude to the second quarter.”
Banks also reported a ‘strong’ net tightening of credit standards for housing loans and a moderate net tightening targeting consumer credit in the second quarter of this year. In the current quarter, banks anticipate a further net tightening of credit standards for all lending for households while a “strong” net decrease in housing loan demand is also possible.
