ECB Says Tightening Of Credit Standards Stable In Second Quarter

The European Central Bank said euro- area banks tightened credit standards in the second quarter at the same pace as in the first, and they expect loan demand to decline in the three months through September.

“Despite the re-intensification of the sovereign debt crisis in the second quarter of 2012, the July 2012 bank lending survey shows that the net tightening of banks’ credit standards was broadly stable at the euro-area level in the second quarter of 2012 compared with the first quarter, both for loans to enterprises and for loans to households,” the ECB said in its quarterly report published in Frankfurt today.

The ECB has flooded banks with more than 1 trillion euros ($1.2 trillion) in cheap three-year loans and eased collateral requirements to encourage lending. The ECB said today banks’ access to retail and wholesale funding deteriorated at a slower pace in the second quarter than at the end of 2011, while tensions on sovereign-debt markets impacted funding conditions “substantially.”

“Euro-area banks expect a similar degree of net tightening in credit standards for loans to enterprises, and a further decline for housing loans and for consumer credit,” the ECB said.

Euro-area banks reported “a significant fall” in demand for company loans in the second quarter, which was less pronounced than in the first three months of the year, the ECB said. Financial institutions expect “a continued decline” in net demand for loans, both for enterprises and households, according to the report.

Bloomberg