FRANKFURT, Jan 31 (Reuters) – Euro zone banks have tightened companies’ access to credit by the most since the 2011 debt crisis and expect to continue doing so as they turn more pessimistic on the economy amid rising borrowing costs, a European Central Bank survey showed on Tuesday.
But demand for loans from enterprises and households also fell for the same reasons, with the drop in demand for mortgages the biggest on record, the ECB’s quarterly Bank Lending Survey showed.
The results showed the ECB’s steady diet of interest rate hikes, which began in the summer, was taking its toll on the economy, and they may play into the hands of policymakers arguing for smaller rate hikes in the coming months at a meeting on Thursday.
A net 26% of banks polled by the ECB said they made their standards stricter for approving loans to companies in the final quarter of last year, the biggest tightening since 2011.
Banks also restricted access to consumer credit and mortgages, a trend that banks expect to continue this quarter.
“Risks related to the economic outlook, industry or firm-specific situation and banks’ risk tolerance continued to have a tightening impact on credit standards,” the ECB said.
The central bank for the euro zone has been battling the briskest inflation in decades, the result of higher energy costs but also the reopening of the euro zone’s economy after the COVID-19 pandemic.
This was putting households off taking out credit to buy consumer goods or property.
A net 74% of banks reported falling demand for mortgages in the last quarter, with the biggest drops seen in Germany and France.
“This highlights a strong negative impact of recent interest rate increases on housing loan demand, coupled with declining consumer confidence,” the ECB said.
Reporting By Francesco Canepa; editing by Balazs Koranyi and Jason Neely
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
