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In the October 2015 bank lending survey (BLS), euro area banks reported a net easing of credit standards on loans to enterprises in the third quarter of 2015 (a net percentage of -4% of banks reported that credit standards had become tighter, after -3% in the previous quarter), which was stronger than banks’ expectations in the previous survey round. Competitive pressures were the main factor behind the easing of credit standards on loans to enterprises. Banks reported a net tightening of credit standards on loans to households for house purchase (a net percentage of 5% of banks reported tightened standards, from -9% in the previous quarter), broadly in line with the expected tightening of standards in the previous survey. For loans to households for house purchase, the tightening was driven by a notable worsening of “other factors” reported by banks, in particular relating to national regulation, which offset the easing effect of competition on credit standards.
When negotiating on the conditions for new loans, banks continued to ease their terms and conditions on loans across all categories, mainly driven by a further narrowing of margins on average loans, i.e. there was a smaller margin or spread over market rates. As with credit standards, the main factor contributing to the easing in terms and conditions was competition.
Net demand for loans to enterprises increased, due mainly to the general level of interest rates, as well as to increased needs for fixed investments. Net demand for housing loans continued to increase due to the low level of interest rates and housing market prospects.
Regarding euro area banks’ access to retail and wholesale funding, access to funding improved for all main market instruments, while retail deposit funding deteriorated slightly.
Regarding the impact of the ECB’s expanded asset purchase programme (APP), banks continue to report that the additional liquidity from the APP is being used for granting loans. The APP had a net easing impact on credit standards and particularly on credit terms and conditions. The easing impact was greatest for loans to enterprises.