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Euro zone banks expect to ease business loan standards in second quarter - ECB

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Euro zone banks expect to ease business loan standards in second quarter - ECB
FILE PHOTO: Mario Draghi, President of the European central Bank (ECB) attends a news conference on the outcome of the Governing Council meeting at the ECB headquarters in Frankfurt, Germany, March 7, 2019. REUTERS/Kai Pfaffenbach/File Photo   -   Copyright  Kai Pfaffenbach(Reuters)
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FRANKFURT (Reuters) – Euro zone banks expect to ease credit standards for business loans and consumer credit in the second quarter but may tighten them for mortgages, the European Central Bank said in a quarterly lending survey on Tuesday.

With economic growth slowing and recession fears rising, ECB policymakers recently approved a new set of ultra cheap loans to commercial banks on concerns that lenders could stop the flow of credit to the real economy, exacerbating the downturn.

But the results of the survey, a key input in policy deliberations, suggest that banks are not planning to make it any harder for businesses to get loans.

“For the second quarter of 2019, banks expect an easing of credit standards for loans to enterprises and consumer credit, and a further tightening of credit standards for housing loans,” the ECB added.

In the first quarter, credit standards — banks’ internal guidelines or loan approval criteria — remained broadly unchanged for loans to enterprises while credit standards for mortgages and consumer credit tightened, the ECB added.

“Banks’ cost of funds and balance sheet constraints and risk perceptions contributed to a tightening of credit standards on loans to enterprises, while competitive pressures continued to contribute to an easing of credit standards,” the ECB said.

In terms of volumes, banks expect an increase in net demand for housing loans, consumer credit and business loans, the ECB said.

(Reporting by Balazs Koranyi; Editing by Francesco Canepa)

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