ECB says banks show signs of relaxing loan conditions

[FRANKFURT] Europe's battered financial sector is showing further signs of healing and conditions for bank loans are easing while demand for loans is picking up, a key ECB survey showed on Wednesday.

Just a few days after the European Central Bank gave most eurozone banks a clean bill of health, its quarterly bank lending survey showed that banks are easing credit standards for customers across all loan categories.

In addition, demand for loans is also increasing, the ECB wrote.

"According to the October bank lending survey (BLS), credit standards for all loan categories eased in the third quarter of 2014," the report said.

"For the second time in a row, a small net percentage of euro area banks (3.0 per cent after 2.0 per cent in the previous quarter) reported an easing of credit standards on loans to enterprises, as compared with an overall tightening in the period from mid-2007 to early 2014," it said.

The findings of the survey should provide some encouragement to the ECB, since the chronic weakness of credit activity in the euro area has been blamed for the absence of any noticeable recovery in the 18 countries that share the single currency.

The ECB has said its ultra-easy monetary policy has not been feeding through into the real economy, because banks are simply not lending, particularly to the small and mid-sized enterprises (SMEs) that are the region's economic backbone.

In a bid to restore confidence in the banking sector, the ECB conducted a year-long audit - the most in-depth and stringent so far - of 130 eurozone banks.

The results were published on Sunday and showed that four out of five banks passed the test.

AFP