In the eurozone, banks reported the first increase in demand for consumer credits and housing loans since 2022.
The mentioned information was made public by the European Central Bank. The quarterly survey of bank lending conducted by the financial regulator also recorded a decrease in demand from companies on the appropriate trajectory during the three months through June. At the same time, in this context, it was noted that within the framework of the mentioned tendency, significant differences were observed throughout the region. For example, the corresponding indicator showed a drop in Italy and France. In Germany and Spain, the tendency was on an upward trajectory.
On Tuesday, July 16, the ECB said that higher interest rates and lower investment in fixed assets continued to exert restraining pressure on demand for loans from companies. The financial regulator also noted that improved housing market prospects, consumer confidence, and spending on durable goods became a factor of a positive impact on demand from households.
Lending data is the main input for ECB policymakers. It is the relevant information that determines how quickly financial institution officials can cut interest rates after the first lowering in June. It is widely believed among experts that a downward revision of the cost of borrowing by the ECB is possible no earlier than September.
Also, many analysts currently predict that inflation will slowly decline in the coming months. This point of view is based on the fact that the economic recovery in the 20-country bloc is gradually intensifying. At the same time, a positive dynamic is not a guaranteed scenario, although it belongs to the category of realistic prospects.
The ECB report notes that banks expect an increase in net demand for loans in all categories in the third quarter of the current year. According to the results of a survey conducted by the financial regulator, credit standards have not changed in general and continue to remain at a high level. It is worth clarifying that the mentioned standards are internal guidelines of lenders or criteria for approving loans. For companies, the relevant parameters have become moderately strict. At the same time, credit standards for the housing sector have been slightly eased.
The ECB said that banks’ risk tolerance was the main reason for the tightening of lending conditions to companies. The financial regulator also paid attention to unchanged credit standards for loans to households.
In a study published in 2022, the ECB stated that demand for credit outstrips actual loan growth by three quarters for companies and by five to six quarters when it comes to standards.
As we have reported earlier, ECB’s Olli Rehn Sees Bets for Two More Cuts in 2024 as Reasonable.
