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Banks’ cost of funds and balance sheet constraints as well as competition were driving banks’ further net easing of credit standards for loans to enterprises. By contrast with the development for enterprises, there was a slight net tightening of credit standards on loans to households for house purchase (2%, from -4% in the previous quarter). According to new evidence, there have been substantial improvements in the level of credit standards compared with banks’ indications one year ago. At the same time, according to euro area banks, the level is still tight in historical comparison.
Concerning terms and conditions, banks indicated a further narrowing of margins on average loans and, to a smaller extent, of margins on riskier loans. In addition, according to new evidence, rejection rates for loans to enterprises and housing loans decreased in the first quarter of 2015.
Net demand for loans to enterprises continued to improve, mainly related to inventories and working capital and the low general level of interest rates, a factor that has been added in this survey round. Different from the previous survey round, fixed investment contributed negatively to the demand for such loans. Net demand for housing loans continued to increase at a fast pace, driven in particular by the low general level of interest rates and housing market prospects.
In addition, euro area banks’ access to wholesale funding improved further in net terms in the first quarter of 2015 for all main market instruments, as did their access to retail deposit funding.
In response to the additional ad hoc questions on the impact of the ECB’s expanded asset purchase programme (APP), euro area BLS banks indicated that they have used the additional liquidity related to the APP in particular for granting loans and intend to continue doing so in the coming months. In addition, banks indicated a net easing impact of the APP on credit standards and credit terms and conditions, in particular for loans to enterprises, which is expected to increase in the coming months.
The BLS, which is conducted four times a year, was developed by the Eurosystem in order to enhance the understanding of banks’ lending behaviour in the euro area. The results reported in the April 2015 survey relate to changes in the first quarter of 2015 and to expectations of changes in the second quarter of 2015. In this survey round, an enhanced questionnaire with new and amended questions has been introduced. The April 2015 BLS was conducted between 6 and 23 March 2015. With 142 banks participating in the survey, the response rate for the April 2015 BLS was 100%. The increase in the sample of banks surveyed to 142 mainly reflected the enlargement of the euro area with Lithuania.
Euro zone banks expect the strongest demand for loans in more than a decade in coming months as the European Central Bank's bond-buying programme improves funding conditions, an ECB survey showed on Tuesday.
The ECB's quarterly Bank Lending Survey, which polls more than 140 top banks, showed that lending standards were also gradually being loosened. The process was expected to remain slow, although there are bright spots, such as Italy.
The results are the clearest sign yet that the euro zone's credit cycle is improving after years of aneamic lending. Combined with recent improvement in economic data, they provide an encouraging outlook for the region.
A net 39 percent of banks -- the highest since the ECB started collecting the data in 2003 -- foresee stronger demand for loans from companies in the coming three months. Twenty-nine 29 percent expected it to rise for house purchases.
"There have been substantial improvements in the level of credit standards compared with banks' indications one year ago," the ECB said in its report.
The figures also showed banks were making it easier to borrow. On balance, 9 percent eased lending terms over the last quarter and 1 percent expected then to be loosened them in the coming three months.
Of the big euro zone countries, Italy saw the biggest improvement, with a net 25 percent of its banks loosening lending standards over the last three months. A net 13 percent eased standards in the Netherlands and 7 percent in France.