Credit standards remained unchanged for corporate clients, according to the European Central Bank’ (ECB) survey for the third quarter of 2024. This happened after more than two years of consecutive tightening, ECB notes. Credit standards eased for loans to households for house purchases but tightened for consumer credit, the data shows. Housing loan demand rebounded strongly on the back of expected interest rate cuts and improving housing market prospects.
According to the results of the survey, regularly conducted by the ECB among euro area banks, credit standards of the financial institutions remain unchanged – about banks’ internal guidelines or loan approval criteria for corporate clients. At the same time banks’ risk perceptions continue to have a small tightening effect. For households, credit standards eased somewhat more than expected for housing loans, primarily because of competition from other banks. Especially for consumer credit the main reason for tightening is an additional perceived risk.For the fourth quarter of 2024, banks expect a net tightening of credit standards for loans to firms and consumer credit and a net easing for housing loans. Banks expect net demand to increase across all loan segments.
For the first time since the third quarter of 2022, banks reported a moderate net increase in demand from firms for loans or drawing of credit lines. The reason is the low interest rates. This is also among the main reasons for growth in the demand for loans for the purchase of property by households, with a strong increase. In consumer loans the growth is more moderate.
Banks expect the negative net impact on margins associated with ECB rate policy to deepen and to result in a decline in overall profitability from the high levels reached during the 2022-2023 tightening cycle, according to the survey results.
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