The bank plans to further tighten the conditions for access to loans

He European Central Bank (ECB) As stated, in the first quarter, banks tightened lending standards for companies and households for the purchase of an apartment more than they expected, due to the rise in interest rates.

The ECB reported this Tuesday that 27% of the banks it surveyed said they tightened lending conditions for companies in the first quarter (27% tightened in the fourth quarter of last year).

From a historical perspective, “the pace of net tightening of credit standards at the highest level since the sovereign debt crisis of 2011.”.

Credit standards are banks’ internal guidelines or criteria for granting loans.

Banks have also significantly tightened their lending standards for households to purchase a home. 19% of the surveyed banks said that they tightened the conditions for lending to households for the purchase of an apartment (21% of them tightened in the fourth quarter).

The tightening of lending conditions for companies and households “signals a permanent weakening of lending dynamics” because there is a perception of greater risk and, to a lesser extent, banks’ lower risk tolerance.

Funding costs for banks have risen as the ECB has raised its interest rates since July last year and central bank liquidity has been reduced, affecting credit standards for companies.

However, 10% of banks in the euro area tightened consumer lending conditions in the first quarter (17% tightened in the fourth quarter), according to the ECB.

The ECB conducted the survey, which it conducts four times a year to better understand bank lending, between March 22 and April 6 in 158 eurozone banks.

“The demand for loans fell sharply, due to rising interest rates, lower investments in fixed capital and the weakening of the real estate market,” adds the ECB.

The drop in demand for loans was stronger in the first quarter than banks had expected in the previous quarter and is the strongest since the global financial crisis, due to the rise in interest rates.

Banks are planning to further tighten the conditions for lending to companies and individuals for home purchases in the second quarter of 2023, albeit more moderately, and maintain the tightening of consumer lending standards.