The April 2024 euro area bank lending survey (BLS) conducted by the European Central Bank (ECB) reveals that euro area banks are persistently tightening their credit standards for enterprises. However, the quarterly survey also suggests a slight easing in progress for consumers.
According to an ECB press release, the Q1 2024 survey encompassing 157 banks indicates a marginal net tightening of credit standards - including internal guidelines or loan approval criteria - for loans or credit lines to businesses. This is reflected in a 3% net percentage of banks, a decrease from 9% in the previous round. Interestingly, for the first time since Q4 2021, banks have reported a net easing of their credit standards for loans to households for house purchases, represented by a net percentage of -6%. Concurrently, credit standards for consumer credit and other lending to households have tightened further, with a net percentage of 9%.
The press release further explains that while banks' risk perceptions have resulted in tightening across all loan categories, factors such as risk tolerance and competition have prompted an easing in certain loan categories like home loans. In Q2 2024, banks expect moderate net tightening for loans to enterprises; however, the standards for loans to households are projected to remain unchanged.
The ECB press release also highlights that demand from enterprises for loans and drawing of credit lines significantly declined in Q1. On the other hand, demand for consumer credit and other lending to households has stabilized. The ECB attributes this decreased demand from enterprises to higher interest rates and lower fixed investment along with diminished consumer confidence among households.
Lastly, according to the press release, surveyed banks pointed out additional factors contributing to tightening. These include the reduction of ECB's monetary policy asset portfolio and the phasing out of the third series of targeted longer-term refinancing operations (TLTRO III).