Eurozone banks tighten credit even as demand for it collapses, says ECB

EUROZONE banks have tightened access to credit further even as demand for it from households and companies collapses, a European Central Bank Survey showed on Tuesday (May 2), in a fresh sign that higher borrowing costs are taking their toll on the economy.

The ECB’s Bank Lending Survey (BLS) is likely to boost the case for a smaller increase in ECB interest rates on Thursday, building on weak output data.

The poll showed a net 38 per cent of banks reported a decline in demand for credit from companies in the first three months of this year, the biggest proportion since the global financial crisis of 2008-09.

“The general level of interest rates was reported to be the main driver of reduced loan demand, in an environment of monetary policy tightening,” the ECB said.

And banks were making it harder for the companies that did apply to get a loan or credit line, with a net 27 per cent of lenders reporting tighter credit standards.

This matched the previous quarter at levels not previously seen since the euro zone debt crisis in 2011.

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Demand for home mortgages collapsed further, with a net 72 per cent of banks reporting a decline, as households turned pessimistic about the prospects for the property market. REUTERS