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Eurozone banks tighten lending standards as risks mount

ECB survey data shows corporate, housing and consumer credit standards tightening further, while housing-loan demand fell sharply in the second quarter.

Reported · Written up by our desk · Central Banks

Eurozone banks continued tightening lending standards in the second quarter, according to the ECB Bank Lending Survey, citing a less favorable economic outlook, geopolitical tensions, and energy-related risks.

The survey showed a moderate net tightening for corporate loans at 7%, with housing loans tightening at 9% and consumer credit at 12%. Banks pointed to weaker risk tolerance and higher perceived credit risks as the main drivers, and they expect standards to tighten further across all loan categories in the third quarter.

On lending terms, banks tightened overall conditions primarily through higher interest rates and reported higher rejection rates for loan applications, especially for consumer credit. Demand was mixed, with corporate loan demand edging higher by 3%, supported by needs tied to inventories, working capital, debt refinancing, and investment by large firms.

In contrast, housing-loan demand fell by 15%, pressured by weaker consumer confidence, higher borrowing costs, and a softer housing market outlook, while consumer credit demand declined by 2%. Forexlive also said the ongoing bank lending drag adds to uncertainty around the Eurozone growth outlook amid a hawkish ECB stance and geopolitical risk.

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