The European Central Bank (ECB) has published the findings of the Eurosystem's January 2024 euro area bank lending survey. Conducted quarterly, the most recent survey indicated a moderate tightening in credit standards and a decrease in demand for both business and consumer lending.
According to an ECB press release, banks' credit standards for loans or credit lines to businesses continued to tighten in the fourth quarter of 2023, with a net percentage of 4%. Although this tightening was moderate, the ECB stated that it contributed to a significant cumulative tightening that has been occurring since 2022. The ECB attributed this tightening to weak demand and a decline in loan growth to enterprises. Banks reported additional net tightening of credit standards for household lending, which encompasses home loans and consumer credit along with other household lending, with net percentages of 2% and 11% respectively. The ECB identified risk perceptions as the primary reason for the tightening of both business and household credit standards for loans. Moreover, as the ECB noted, banks anticipate further tightening of these standards during Q1 2024.
In Q4 2023, according to the same press release from the ECB, banks experienced net decreases in demand for loans and drawing from credit lines. The ECB said that interest rates were responsible for driving down loan demand. Additionally, lower fixed investment led to reduced demand for business loans, while diminished consumer confidence and housing market prospects decreased demand for household loans.
As per another statement from the ECB press release, the Eurosystem devised the euro area bank lending survey to enhance its understanding of bank lending behavior within the euro area. The January 2024 survey was conducted from December 8, 2023, to January 2, 2024. The results reflect changes observed in Q4 2023 and projected changes in Q1 2024. A total of 157 banks participated in the January 2024 snapshot with a response rate of 100%.