The European Central Bank has published a working paper examining how the surge in energy prices after Russia’s invasion of Ukraine affected bank lending to firms, using Danish manufacturing companies as a case study. The paper finds that bank credit to high-energy-intensive firms declined persistently relative to comparable low-energy-intensive firms, even though credit to the manufacturing sector as a whole continued to grow. In the second quarter of 2022, credit growth for high-energy-intensive firms was 8.75 percentage points lower than for less exposed firms borrowing from the same banks and operating in the same sector. The gap persisted for several quarters and closed only around the third quarter of 2023. New loans to exposed firms also carried higher interest rates and tighter terms. The analysis combines firm-level energy-use data, the Danish credit register and balance-sheet information, and compares firms that differ in energy intensity while controlling for sector and bank effects. Most of the credit shortfall came from lower use of existing credit lines rather than cuts in credit limits, which the paper interprets as evidence of weaker credit demand, particularly among safer firms and those with stronger liquidity positions. At the same time, loan-level results point to some supply-side tightening. After controlling for borrower risk and loan characteristics, credit spreads on new loans to high-energy-intensive firms rose by about 1.6 percentage points, with maturities shortening and collateral requirements increasing, indicating that banks also priced energy-related risk more aggressively. The paper says the findings show how a large input-cost shock can alter credit allocation even without a broad-based credit crunch. It points to the value of monitoring firms’ energy exposure and banks’ sectoral concentrations when assessing monetary transmission and financial stability effects from similar shocks.
European Central Bank2026-07-27
European Central Bank publishes working paper finding energy price shock cut bank credit to energy-intensive Danish firms
An European Central Bank working paper finds that the 2022 energy price shock reduced bank credit to high-energy-intensive Danish manufacturing firms relative to similar peers, with credit growth 8.75 percentage points lower in the second quarter of 2022. Most of the decline reflected lower use of existing credit lines, especially by safer and more liquid firms. New loans to exposed firms also carried higher spreads and tighter terms, pointing to some bank supply tightening alongside weaker credit demand.