FRANKFURT (Reuters) -Euro zone banks unexpectedly tightened access to corporate credit in the third quarter, with German lenders leading the way on fears over the economic outlook and tariffs, the European Central Bank said based on a quarterly survey.
Lending growth has been inching up for most of this year as the ECB’s two percentage points of rate cuts have fuelled some demand, but credit expansion is still moderate at best as tariff-induced uncertainty weighs on economic growth.
“Perceived risks to the economic outlook contributed to tighter credit standards,” the ECB said on Tuesday based on a survey of 154 of the bloc’s biggest banks.
“Banks also cited the current high level of geopolitical uncertainty and trade risks as reasons for discriminating across sectors or firms when issuing new loans, and several banks indicated intensified monitoring and analysis,” the ECB added.
Germany accounted for much of the deterioration, and credit standards were unchanged in France, Italy and Spain, the ECB added.
Corporate loan demand still increased, but this expansion was below expectations and the rate remained weak overall, the ECB said.
“Loan demand was supported in the third quarter by declining lending rates and by increased financing needs for debt refinancing or debt restructuring, while the impact of fixed investment, inventories and working capital was neutral,” the ECB said.
Corporate lending grew by 2.9% in September, earlier data showed, a level close to a two-year high but well below rates of around 4% in the pre-pandemic years.
In the final quarter of the year, banks see unchanged credit standards and loan volumes for firms, the ECB added.
In the case of housing loans, credit standards were unchanged despite banks’ earlier expectation for some modest easing, and lenders see steady loan access in the fourth quarter.
As in the case of corporate loans, credit standards tightened in Germany but remained unchanged in France, Italy and Spain, the ECB added.
Mortgage demand continued to increase substantially in the third quarter and banks see further expansion ahead.
(Reporting by Balazs Koranyi; Editing by Jan Harvey)
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