|Chart 1. Changes in credit standards applied to the approval of loans or credit lines to enterprises (net percentage of banks contributing to tightening standards): Notes: "Realised" values refer to changes that have occurred, while "expected" values are changes anticipated by banks. Net percentages are defined as the difference between the sum of the percentages of banks responding "tightened considerably" and "tightened somewhat" and the sum of the percentages of banks responding "eased somewhat" and "eased considerably". The net percentages for responses to questions related to the factors are defined as the difference between the percentage of banks reporting that the given factor contributed to a tightening and the percentage reporting that it contributed to an easing.
Eurozone companies increased credit demands from
banks in the final quarter (Q4) of 2010, the European Central Bank said today.
Net demand for loans for house purchase also increased but fell in Ireland.
Demand for corporate loans grew from both small
and medium-sized enterprises, and from large companies, the ECB said in its
quarterly Bank Lending Survey of 120 Eurozone lending institutions.
The banks were reported to have left credit
standards unchanged in the fourth quarter of 2010, the survey found.
The survey says credit standards on loans to small and
medium-sized enterprises (SMEs) were tightened further, albeit only slightly,
while those on loans to larger firms remained stable. Moreover, slightly looser
credit standards applied predominantly to short-term loans, while credit
standards on long-term loans remained unchanged.
Meanwhile, the credit standards applied to households
tended to tighten further. Credit standards on loans for house purchase
appear to be tied closely to country-specific developments in housing markets.
In the last quarter of the 2010, the net percentage of banks reporting a further
tightening of standards for this category of loans bounced back to 11%, mainly
driven by increased risk perceptions. This translated into an increase in, above
all, margins on riskier loans. The net percentage of banks reporting a
tightening of credit standards on loans to households for consumption
purposes also rose slightly (standing at 2%) on account of a more cautious
assessment of individual borrowers’ risk profiles.
Looking forward, Eurozone banks expect a
very slight further tightening, in net terms, of credit standards for all
categories of loans in the first quarter of 2011.
In the last quarter of 2010, Eurozone banks reported that, in
net terms, demand for corporate loans and households’ demand for mortgage loans
continued to increase, while demand for consumer credit contracted, albeit at a
slower pace than in the previous survey round.
In net terms, demand for corporate loans increased in the case of both
SMEs and larger firms, and across all types of maturities (albeit more
dynamically for long-term loans). In the last quarter of 2010, net corporate
demand for loans increased to 10%, compared with 7% in the previous survey. The
survey found for the first time in more than two years, financing needs for
fixed investment purposes stopped dragging down demand for corporate loans. In
addition, Eurozone banks also noted some pick-up in merger and acquisition (M&A)
activities. At the same time, and in line with the impact of recent debt
restructuring forces in the corporate sector, the increase in demand for loans
was partly mitigated by the availability of internal funds.
Net demand for loans for house purchase was reported to
have increased noticeably. In the last quarter of 2010, 23% of all the banks - -
expressed in net terms - - reported an increase in demand, compared with 10% in
the previous survey round. This increase in demand was largely supported by a
positive contribution of housing market prospects and a significantly less
negative contribution of consumers’ confidence.
In the same period, net demand for consumer credit
remained in negative territory, but drew closer to positive values (standing at
-2%, compared with -6% in the third quarter of 2010).
Looking forward, in the first quarter of 2011, Eurozone banks expect positive
developments to continue in net demand across all types of loans.
The Irish Central Bank said the lending situation
for Irish banks was little change from its last survey in October, with banks
saying it was more difficult to secure access to funds on international markets.
The survey said banks expected this situation to deteriorate further in the
first three months of this year.
It showed that demand for loans from business was little changed while demand
from households for mortgage loans fell. Demand for other types of consumer
lending was unchanged.