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This was slightly more pronounced than banks had expected in the previous survey round. Competitive pressure remained the main factor driving this easing. In addition, credit standards on loans to households for house purchase eased marginally (a net percentage of -2%), following a net tightening (4%) in the previous quarter and banks’ expectations of a further net tightening of credit standards.
The net easing of banks’ overall terms and conditions on new loans continued for loans to enterprises and households, mainly driven by a further narrowing of margins on average loans.
Net demand for loans continued to increase across all loan categories. The main contributing factors for net demand for loans to enterprises in the second quarter of 2016 were merger and acquisition activities, inventories and working capital, the general level of interest rates, and debt refinancing, while the positive contribution from fixed investment declined further. Net demand for housing loans was driven by the low general level of interest rates, continued favourable housing market prospects, and consumer confidence.
Regarding euro area banks’ access to funding, access to retail funding improved in the second quarter of 2016. As concerns wholesale funding, access to debt securities and to securitisation improved, while banks’ access to money markets deteriorated.
With respect to the likely impact of ongoing regulatory or supervisory changes, euro area banks continued to adjust to regulatory or supervisory action in the first half of 2016 by further strengthening their capital positions and reducing their risk-weighted assets, with the reduction mainly being due to a decline in riskier loans.
Regarding the targeted longer-term refinancing operations (TLTROs) conducted by the Eurosystem, 60% of euro area BLS banks reported that they participated in the first TLTRO-II operation, largely driven by profitability motives.