The European Central Bank has published its second-quarter 2026 euro area bank lending survey, showing that banks tightened credit standards again across lending to firms, housing loans and consumer credit, while loan terms also became less favorable. The tightening was moderate for corporate lending and stronger for household lending, driven mainly by higher risk perceptions, lower risk tolerance and higher lending rates. Rejection rates rose for all borrower groups, and demand diverged across segments, with corporate loan demand edging up slightly but housing loan demand contracting sharply and consumer credit demand softening further. For firms, banks reported a 7% net tightening in credit standards, below the previous quarter and well below what banks had expected, while loan demand rose by 3%, supported by inventories and working capital, fixed investment by large firms, and debt refinancing and restructuring needs. Housing loan standards tightened by 9% and consumer credit standards by 12%, with demand for housing loans falling by 15% as consumer confidence weakened and housing market prospects deteriorated, while consumer credit demand slipped by 2%. Ad hoc survey responses showed a slight deterioration in access to retail funding, debt securities and money markets, and a further tightening effect from non-performing loan ratios and other credit-quality indicators on lending to firms and consumer credit. Sectorally, tightening remained strongest in the car industry and other energy- and geopolitically exposed manufacturing segments. On climate-related lending, banks reported easier credit standards and stronger demand for green firms, firms in transition and higher-energy-performance buildings, while standards tightened for high-emitting firms without credible transition plans and for low-energy-performance buildings. For the third quarter of 2026, banks expect further but generally milder tightening in credit standards for firms and housing loans, and a larger tightening for consumer credit. They also expect a modest increase in corporate loan demand, a further decline in housing loan demand, unchanged consumer credit demand and additional deterioration in access to most funding sources other than securitisation.
European Central Bank2026-07-21
European Central Bank reports further tightening in euro area bank credit standards, marked fall in housing loan demand
The European Central Bank’s second-quarter 2026 bank lending survey shows euro area banks tightened credit standards further for firms, housing loans and consumer credit, while rejection rates increased across all segments. Corporate loan demand rose slightly, but housing loan demand fell sharply and consumer credit demand softened. Banks expect further tightening in the third quarter, along with another decline in housing loan demand.