European Central Bank survey assessment points to renewed tightening of euro area bank credit supply to firms in Q4 2024

The European Central Bank published an Economic Bulletin assessment combining results from the euro area bank lending survey (BLS) and the survey on the access to finance of enterprises (SAFE) to analyse lending conditions for euro area firms from both banks’ and firms’ perspectives. It finds that both surveys pointed to a renewed tightening in bank credit supply to firms in the fourth quarter of 2024, while loan demand remained subdued. The analysis highlights that BLS credit standards and SAFE perceptions of bank loan availability generally move closely together, with the latest tightening following substantial tightening during 2022-23 and a more moderate tightening across the first three quarters of 2024. In the fourth quarter of 2024, the renewed deterioration in credit supply appeared to be driven by higher credit risks, with both banks and firms citing the general economic outlook and firm-specific outlook as key factors reducing loan availability. On loan contract terms, both surveys reported that declining interest rates coincided with tighter collateral requirements; firms also reported that non-interest financing costs continued to exert a net tightening effect, while banks judged their non-interest charges to be broadly unchanged. On demand, the ECB notes that the BLS measure is more cyclical than SAFE indicators, while SAFE also captures financing needs that may not translate into bank applications, including among firms without bank contact or discouraged borrowers; across both surveys, indicators pointed to persistently weak loan demand from end-2022 through the fourth quarter of 2024 despite falling interest rates.