Euro zone banks, especially in crisis-stricken countries, have tightened their purse strings in response to tougher capital requirements and an uncertain environment, while companies have held off investments.
To solve the problem, the ECB has started offering banks four-year loans at ultra-cheap rates and has begun buying covered bonds and asset-backed securities to ease the burden on banks' balance sheets and entice them to lend.
These measures will take time to gain traction. The ECB may expand its stimulus early next year.
In October, loans to the private sector contracted by 1.1 percent from the same month a year earlier, after a contraction of 1.2 percent in September, ECB data showed on Thursday.
Euro zone M3 money supply - a more general measure of cash in the economy - grew at an annual pace of 2.5 percent in October, unchanged from the prior month.
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