The European Central Bank (ECB) published its report on the results of the July 2010 bank lending survey for the Euro area. The bank lending survey, which is conducted four times a yearwas developed by the Eurosystem in order to enhance the understanding of bank lending behaviour in the Euro area.
The latest survey round once again included a number of ad hoc questions aimed at gauging the extent to which the financial market tensions experienced since the second half of 2007 have affected banks’ credit standards for loans and credit lines to enterprises and loans to households in the euro area. The July 2010 bank lending survey was conducted between 14 June and 2 July 2010.
As regards loans to enterprises, in the July 2010 bank lending survey (BLS) referring to the second quarter of 2010, Euro area banks reported an increase in the net tightening of credit standards compared with the first quarter, exceeding expectations from the previous survey round. As regards households, banks reported the same net tightening of credit standards in the second quarter of 2010 as in the previous quarter for loans to households both for house purchase and for consumption. The levels of net tightening were also beyond the expectations formulated in the previous survey round. Renewed constraints in banks’ access to funding and liquidity management are reported as key factors underlying the tighter credit policy. Meanwhile, the demand for loans perceived by banks continues to recover.
More precisely, the downward trend in the net tightening of credit standards on loans to enterprises which came to a halt in the first quarter of 2010 was reversed in the second quarter, increasing from 3% to 11%. Banks had expected a further net tightening of 2% at the time of the previous survey round. Looking forward, Euro area banks anticipate credit standards on loans to enterprises to tighten somewhat in the third quarter of 2010 (by 5%).
The factors contributing to the reinforced net tightening of loans to enterprises relate to the deterioration of banks’ own balance sheet situation, particularly as regards their liquidity position and access to wholesale funding. At the same time, slight improvements in credit risk, and to some extent, in general economic conditions were perceived by the reporting banks.
© ECB - European Central Bank
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