As the European Central Bank (ECB) reports, a bank survey found that banks have become stricter when it comes to granting both personal and corporate loans.
Banks stricter when it comes to lending
The last survey on bank lending (Bank Lending Survey, BLS) would have shown that banks’ internal guidelines and credit approval criteria for all types of loans would have tightened in the fourth quarter of 2020. Both loans to companies and private individuals are affected by the stricter conditions, such as housing loans, but also other personal loans. However, the tightening in the private sector was somewhat lower in the fourth quarter of 2020 than in the previous quarters of 2020.
The net share of those banks that reported the tightening of credit standards for loans or corporate credit lines would have increased.
The banks cited the deterioration in the general economic outlook as the reason for the tightening of credit conditions for businesses and households. Other factors were an increased credit risk of the borrowers and a lower risk tolerance.
Banks would expect further tightening of credit standards in the first quarter of 2021, both in terms of corporate lending and personal lending.
More demand for home loans
The ECB also states that corporate credit demand has continued to decline. By contrast, the demand for house building loans would have increased.
Banks would expect net demand for corporate and consumer credit to increase in the first quarter of 2021. The net demand for home loans would likely decline.
According to the banks of the euro area, non-performing loans would have tightened credit standards and terms for corporate and consumer loans in the second half of 2020. The impact on home loans was largely neutral.