From October to December, the monetary institute observed a “significant tightening of credit standards for all categories of loans” to the economy, states the institute’s quarterly report on credit conditions in the euro area.
Since July, the ECB has been running a shock interest rate policy aimed at cooling economic activity in the hope of bringing inflation back to an annual increase of 2%, after peaking at more than 10% in the autumn.
This policy will continue at the next meeting on Thursday of the monetary institute. During this time, banks have to refinance themselves at higher costs, which they pass on to their lending policy.
The biggest tightening since 2011
Companies’ credit standards in particular have seen the tightening”largest reported since 2011 eurozone sovereign debt crisis“, the phenomenon also affects housing and consumer credit, but to a lesser extent, notes the ECB.
These lending criteria should continue to tighten in the first quarter for all categories of loans, according to this survey conducted between December and January among 151 companies.
The rise in interest rates is also weighing on the demand for loans, but in a more nuanced way in the eurozone.
Demand for business loans fell sharply in Germany in the last quarter, while it increased in Spain and France.
Companies are knocking on the doors of banks mainly to finance their operating costs increased by the increase in the price of energy and raw materials.
As in previous quarters, investment had a greater moderating effect on loan demand, a sign of the expectation of a less uncertain environment ahead of the launch, the ECB notes.
Demand for home loans fell sharply, particularly in France and Germany, reflecting higher interest rates.
The banks expect a “net decrease” of the demand for loans in the second quarter, both on the business side and for the purchase of housing.