Euro zone banks expect to tighten access to credit in third quarter, ECB says
14.07.2020, 08:22

Euro zone banks expect to tighten access to credit in third quarter, ECB says

Reuters reports that euro zone banks maintained relatively easy access to credit for firms in the second quarter with the backing of government guarantees, but they will likely tighten credit standards in the following three months, the European Central Bank said on Tuesday.

With a pandemic-induced crisis shutting much of the euro zone economy, firms rushed to tap bank credit to stay liquid and government guarantee schemes provided vital support for banks to keep cash flowing.

"In the third quarter of 2020, banks expect a considerable net tightening of credit standards on loans to enterprises, which is reported to be related to the expected end of state guarantee schemes in some large euro area countries," the ECB said in a lending survey.

Credit standards on housing loans tightened in the second quarter and this trend is likely to continue in the third quarter, the ECB added based on a survey of 144 banks done between June 5 and 23, just as restrictive measures were being slowly lifted.

Corporate credit demand also surged in the second quarter as firms drew on their credit lines for emergency liquidity but banks expect a more moderate increase in demand during the current quarter.

Household loan demand fell sharply in the second quarter but banks see a rebound in the third quarter.

A key input in the ECB's deliberations, the quarterly lending survey comes just two days before the ECB's July policy meeting that will likely review the bank's ultra easy policy stance but not approve any further stimulus measures.

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