European Central Bank survey finds further tightening in euro area firms’ bank financing conditions

The European Central Bank published its third-quarter 2026 Survey on the Access to Finance of Enterprises, showing higher borrowing costs, declining bank loan availability and expectations of further deterioration in access to financing. Firms reported weaker profits despite increased investment. A substantial change in the survey sample complicates interpretation of the rise in reported inflation expectations. A net 46% of firms reported higher bank loan interest rates, up from 42% in the previous quarter. Loan availability declined for a net 5%, compared with 1% previously, while financing needs fell for a net 2%. Among firms that considered bank loans relevant to their business, 7% encountered financing obstacles, up from 5%. Looking ahead, a net 8% expected bank loan availability to deteriorate over the following three months, compared with 2% in the previous survey. The general economic outlook remained the main factor constraining access to external financing. A net 21% of firms reported declining profits, up from 16%, while a net 8% increased fixed investment, compared with 6%. A net 11% expected investment to rise in the fourth quarter of 2026. Inflation expectations increased sharply in the full sample, but remained broadly stable among firms participating in both the second and third quarters. First-time respondents accounted for most of the sample, making comparisons of numerical expectations difficult. Full-sample median inflation expectations rose to 4.0% for one year ahead and 5.2% for both three and five years ahead. Among returning respondents, the one-year median held at 3.0%, while the three-year and five-year medians edged up to 3.2% and 3.1%, respectively.