Eurozone loans to private sector still contracting

[FRANKFURT] Loans to the private sector in the euro area, a gauge of economic health, fell year-on-year in September, but by slightly less than in August, the European Central Bank said on Monday.

The volume of loans to private businesses and households declined by 1.2 per cent in September compared with the same month in 2013, a slightly lower rate than the minus 1.5 per cent recorded in August, the ECB said in a statement.

The long and deep financial crisis in the 18 countries which share the euro has squeezed lending, thus dampening economic activity.

The overall eurozone money supply grew 2.5 per cent in September from a year earlier, higher than the 2.1-per cent growth in August.

The ECB regards M3 money supply as a barometer for future inflation.

The results of so-called stress tests carried out by the ECB on leading eurozone banks, and announced on Sunday, cleared all but 25 banks as having adequate capital and being soundly based.

The assessment was broadly well received on financial markets on Monday, since it tended to raise confidence in the banking sector and allows banks, which have been strengthening their financial base to pass the tests, some extra margin for manoeuvre to lend if and when loan demands picks up.

AFP