The European Central Bank published results from its euro area bank lending survey showing a renewed net tightening of credit standards for loans or credit lines to enterprises in the fourth quarter of 2024 (net 7%). Credit standards were broadly unchanged for loans to households for house purchase (net 1%) but tightened further for consumer credit and other household lending (net 6%), mainly reflecting higher perceived risks and, for firms, lower bank risk tolerance. Loan terms and conditions were broadly unchanged for firms and consumer credit but eased strongly for housing loans, driven by lower lending rates and narrower margins on average loans, while stricter collateral requirements and other terms such as covenants offset rate and margin effects for firms. Demand for firm loans increased slightly but remained weak overall, whereas housing loan demand continued to rebound strongly and consumer credit demand increased slightly; banks expected in the first quarter of 2025 a further tightening of credit standards for firms and consumer credit, a small net tightening for housing loans, broadly unchanged loan demand for firms, and further increases in household demand. Access to funding worsened somewhat for retail funding, money markets and debt securities in the fourth quarter of 2024, with broadly unchanged access expected across market segments in the first quarter of 2025. New regulatory or supervisory requirements in 2024 were reported to have increased required capital as well as liquid and risk-weighted assets, and to have tightened credit standards especially for corporate loans, with further net tightening expected in 2025. Credit-quality indicators, including non-performing loan ratios, had a net tightening impact on credit standards for loans to firms and consumer credit in the second half of 2024, the largest since the height of the pandemic and the 2014-17 balance sheet clean-up, and banks expected these effects to continue in the first half of 2025; tightening was also most pronounced across sectors such as commercial real estate, wholesale and retail trade, construction and energy-intensive manufacturing.
European Central Bank 2025-01-28
European Central Bank bank lending survey shows renewed tightening of euro area corporate and consumer credit standards and further tightening expected in early 2025
The European Central Bank's Q4 2024 survey shows renewed net tightening of credit standards for enterprise loans (net 7%) and consumer credit (net 6%), while housing loans remained largely unchanged (net 1%). Loan terms eased for housing loans but stayed unchanged for firms and consumer credit, with stricter collateral requirements offsetting rate and margin effects. Access to funding worsened slightly, and new regulatory requirements increased capital and asset requirements, contributing to tightened credit standards, especially for corporate loans, with further tightening expected in 2025.