Euro area banks reported net tightening of lending standards for corporates, housing, and consumer loans amid economic and geopolitical risks.
Eurozone banks tightened credit standards across all loan categories in the second quarter, driven by weaker risk tolerance and elevated credit risks. The European Central Bank’s Bank Lending Survey revealed a net 7% of banks tightened standards for corporate loans, while housing loans saw a 9% net tightening and consumer credit a 12% net tightening.
The tightening reflects concerns over the economic outlook, geopolitical tensions, and energy-related risks. Banks also raised interest rates and reported a higher share of rejected loan applications, particularly for consumer credit. Demand for corporate loans rose modestly by 3%, exceeding expectations, while housing loan demand dropped sharply by 15% due to weaker confidence and higher borrowing costs.
Banks anticipate further tightening in the third quarter, which could weigh on the euro area’s growth outlook amid persistent geopolitical uncertainty and a hawkish ECB stance.