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Eurozone banks set to tighten lending standards for companies in Q2

Staff Writer |
Eurozone banks are set to tighten lending conditions for enterprises and to maintain credit standards for housing loans in the second quarter, the bank lending survey from the European Central Bank showed.

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Credit standards for loans to enterprises eased slightly in the first quarter due to the competitive pressure.

Similarly, credit standards on loans to households for house purchases also eased.

For the second quarter, banks expect a slight net tightening of credit standards for loans to enterprises and unchanged credit standards for housing loans.

The first quarter survey was conducted among 139 banks between March 16 and 31.

Driven by a further narrowing of margins on average loans, the net easing of banks' overall terms and conditions on new loans continued across all loan categories.

In the first quarter, demand for loans from enterprises increased in the first quarter due to inventories, working capital and the general level of interest rates.

At the same time, net demand for housing loans was driven by the low general level of interest rates and favorable housing market prospects.

The survey participants said the asset purchase programme has had an easing impact on credit terms and conditions.

Further, the ECB's negative deposit facility rate, while having a negative impact on banks' net interest income, is assessed by banks to have a positive impact on their lending volumes.

Finally, euro area banks still assess their current level of credit standards for loans to enterprises and housing loans to be tighter compared with the historical range since 2003.

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