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The net easing of credit standards – i.e. banks’ internal guidelines or loan approval criteria – for loans to enterprises (with a net percentage of -6%) in the third quarter follows a net percentage of -3% in the previous quarter, surpassing the expectations reported by banks in the previous survey round.
In addition, credit standards for loans to households for house purchase also eased slightly and credit standards for consumer credit and other lending to households remained broadly unchanged.
Across the three loan segments, competitive pressures and lower risk perceptions were the main factors contributing to an easing of credit standards, while banks’ cost of funds, balance sheet constraints and tolerance of risk were mostly neutral in terms of their contributions.
For the fourth quarter of 2018, banks expect broadly unchanged credit standards for loans to enterprises and a net easing of credit standards for housing loans, consumer credit and other lending to households.
Banks’ overall terms and conditions eased for new loans to enterprises and new housing loans in the third quarter of 2018, while they remained unchanged for consumer credit and other lending to households. Margins on average loans narrowed across all three loan segments.
Net demand continued to increase across all loan categories in the third quarter of 2018. The net increase in demand for loans to enterprises was driven by the low general level of interest rates, fixed investment, inventories and working capital, and merger and acquisition activity. Net demand for housing loans continued to be driven mainly by the low general level of interest rates, favourable housing market prospects and consumer confidence. Meanwhile, consumer confidence, spending on durable goods and the low general level of interest rates continued to contribute positively to net demand for consumer credit and other lending to households.
As regards the impact of the ECB’s asset purchase programme (APP), the euro area banks that were surveyed reported that the APP had had a positive impact on their liquidity positions and market financing conditions over the past six months, but a negative impact on their profitability as a result of lower net interest margins.