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Euro zone banks expect rising loan demand in third quarter - ECB

Euro zone banks expect rising loan demand in third quarter - ECB
FILE PHOTO: Sign of the European central Bank (ECB) is seen ahead of the news conference on the outcome of the Governing Council meeting, outside the ECB headquarters in Frankfurt, Germany, March 7, 2019. REUTERS/Kai Pfaffenbach -
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KAI PFAFFENBACH(Reuters)
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FRANKFURT (Reuters) – Euro zone banks expect loan demand to rise in the third quarter while they keep corporate lending and mortgage credit standards unchanged, the European Central Bank said in a quarterly lending survey on Tuesday.

With economic growth slowing and uncertainty on the rise, the ECB has already given banks a new round of ultra cheap loans and flagged more policy easing, hoping that lenders maintain the flow of credit even amid a downturn.

The results of the survey, a key input in policy deliberations, suggest that while credit standards — banks’ internal guidelines or loan approval criteria — tightened somewhat for corporate loans, lenders do not expect to tighten access any further.

“Lower risk tolerance and, for loans to enterprises, heightened risk perceptions, accompanied by higher cost of funds and balance sheet constraints, contributed to the tightening of credit standards across loan categories,” the ECB said in a statement.

Among the euro zone’s biggest countries, corporate lending standards tightened the most in Italy and France in the second quarter while in the case of mortgages, Spain saw notable tightening.

The ECB will next meet on Thursday and markets expect the bank to unveil fresh policy measures either this week or at the next meeting in Sept.

(Reporting by Balazs Koranyi; Editing by Francesco Canepa)

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