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This was in line with banks’ expectations in the previous survey round. Competitive pressure continued to have an easing impact. Credit standards on loans to households for house purchase eased (a net percentage of -4%, compared with -2% in the previous quarter), in line with banks’ expectations in the previous survey round.
The net easing of banks’ overall terms and conditions on new loans continued for loans to enterprises and, broadly speaking, for loans to households, mainly driven by a 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 third quarter of 2016 were the general level of interest rates as well as merger and acquisition activity. Net demand for housing loans continued to be 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 third quarter of 2016. With regard to wholesale funding, access to debt securities and securitisation improved, while banks’ access to money markets deteriorated.
With respect to the impact of the ECB’s expanded asset purchase programme, banks have used the additional liquidity related to the APP for granting loans, for refinancing purposes and to a lesser extent for purchasing assets. The net easing impact of the APP continued to be stronger for terms and conditions than for credit standards. At the same time, euro area banks reported a further negative impact from the APP on their profitability, owing to the effect on the net interest margin.
The ECB’s negative deposit facility rate, while having a further positive impact on lending volumes and a negative impact on loan margins, is assessed by BLS reporting banks to have an overall negative impact on banks’ net interest income.
The BLS, which is conducted four times a year, was developed by the Eurosystem in order to improve the understanding of banks’ lending behaviour in the euro area. The results reported in the October 2016 survey relate to changes in the third quarter of 2016 and expectations of changes in the fourth quarter of 2016, unless otherwise indicated.