21 January 2020

ECB: January 2020 euro area bank lending survey

Credit standards remained broadly unchanged for both loans to enterprises and housing loans. Demand for loans to enterprises declined, while demand for housing loans increased further. Euro area banks use TLTRO-III liquidity largely for granting loans.

Credit standards for consumer credit and other lending to households tightened further, despite expectations that they would remain broadly unchanged. Risk perceptions (relating to both the general economic situation and the firm-specific situation) continued to have a tightening impact on the credit standards applied to loans to enterprises. Looking ahead to the first quarter of 2020, banks expect credit standards for loans to enterprises to remain unchanged, while they expect credit standards to tighten for housing loans and to ease for consumer credit and other credit to households.

Banks’ overall terms and conditions remained broadly unchanged in the fourth quarter of 2019 for new loans to enterprises and housing loans, while they eased for consumer credit.

Net demand for loans to enterprises declined in the fourth quarter of 2019 (the first time this had been seen since the fourth quarter of 2013), despite banks expecting it to remain stable overall. That decline in net demand was broadly based across a number of larger and smaller euro area countries.

Euro area banks reported that regulatory or supervisory action continued to have a strengthening impact on their capital positions in the second half of 2019, as well as a tightening impact on credit standards across all loan categories (with further tightening expected over the next six months).

Respondent banks also reported that non-performing loans (NPLs) had a small tightening impact on credit standards for loans to enterprises and consumer credit in the second half of 2019 (and a broadly neutral impact on credit standards for housing loans). Risk perceptions and risk aversion were the main drivers of the tightening impact of NPL ratios.

As regards the impact of the third series of targeted longer-term refinancing operations (TLTRO-III), euro area banks reported that they used TLTRO-III liquidity largely for the purpose of granting loans to the non-financial private sector. Given the attractive conditions surrounding TLTRO-III operations, the profitability motive has been the most important reason for banks to participate so far.

Full press release on ECB

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