Eurozone banks tightened their criteria for lending to the economy in the first quarter at the fastest pace since the sovereign debt crisis in 2011, the European Central Bank (ECB) said on Tuesday. From January to March, “the criteria for the approval of commercial loans and lines of credit tightened further significantly” on net terms, according to a quarterly report that falls two days before the next course-setting monetary policy meeting. of interest rates. interest.
All these data could encourage the monetary institute to limit the next rise in rates that will be discussed on Thursday. Economists are betting on an increase of 0.25 percentage points, after 0.5 points in March.
Gradual end of giant and targeted lending to banks
Banks also reported a sharp net drop in demand for corporate loans or drawdowns in the first quarter, “the largest since the global financial crisis.” The criteria for housing loans granted to households and, to a lesser extent, those for consumer credit have also been clearly tightened.
This tightening comes after a tightening already observed in previous quarters and confirms that the policy of raising interest rates and reducing ECB liquidity injections to fight inflation is having an effect. The ECB is only partially reinvesting the maturing bonds on its balance sheet and is phasing out giant and targeted lending to banks (TLTROs). This has a negative effect on the financing conditions and liquidity positions of the institutions, leading them to tighten credit conditions.
Further tightening expected in Q2
In March, the growth of loans granted to the private sector – companies and households – also continued to slow down, to 3.8% on an adjusted basis for certain financial transactions, according to another monthly ECB survey.
The ECB has raised rates by 3.50 percentage points since July last year as part of an unprecedented campaign of monetary tightening aimed at curbing soaring consumer prices. In the second quarter, banks in the area expect a further tightening of credit conditions and demand on a more moderate scale, except for housing credit.
Source: BFM TV
