Euro area banks relax access to credit for first time since 2007

Across the euro area as a whole banks have relaxed lending standards for the first time since the second quarter of 2007, though the effects have yet to feed through to Irish lenders.

Banks here did not loosen credit standards in the period from the start of April to the end of June, but did see increasing demand for mortgages, 
consumer loans and business loans.

The European Central Bank’s quarterly bank lending survey showed that across the entire euro area banks made it easier for households and companies to obtain credit in the three months to the end of June.

Loan standards remained “relatively tight”, however.

The report also showed that loan demand from households and companies continued to grow across the region, with a particularly pronounced increase in demand for consumer credit.

In Ireland, the Central Bank said credit standards were unchanged in relation to lending to business and households during the same period.

Demand for business loans, home loans and consumer lending – including to buy cars – all increased in Ireland over the period, the survey found.
Across the euro area lending to households and companies is still in decline when compared to a year earlier.

Policy-makers including the European Central Bank (ECB) have highlighted tight credit conditions as one of the factors squeezing the euro area’s faltering recovery, as banks try to repair their crisis-battered balance sheets and face increased scrutiny in the ECB’s comprehensive assessment.

In June, the ECB announced a program of targeted long-term loans to banks as part of a package of measures that also 
included a record-low benchmark rate and a negative deposit rate.

“It’s another step in the right direction,” said Christian Schulz, senior European economist at Berenberg Bank in London.

“Even though all of this is happening at levels that are not normal, ECB policy is impacting banks, and the announcement of the targeted LTROs will have improved sentiment. Low rates are also feeding through to demand.”

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