Eurozone banks tighten lending standards for businesses and households

Eurozone banks tightened lending standards for businesses and consumer loans in the third quarter, according to a European Central Bank survey. They expect further tightening in the fourth quarter.

According to the European Central Bank’s (ECB) October bank lending survey, which included 159 eurozone financial institutions, a net 9% of banks tightened their standards for approving business loans in the third quarter, while a net 14% tightened standards for consumer loans. Mortgage lending standards were unchanged.

Banks attributed the tightening to heightened risk perceptions amid geopolitical crises and a sharp rise in prices, as well as a reduced willingness to take risks. High interest rates over the summer reduced businesses’ demand for loans and credit lines.

ECB building in Frankfurt

At the same time, businesses’ demand for loans to invest in artificial intelligence infrastructure continued to grow steadily. In the fourth quarter, banks expect further tightening of lending standards for both businesses and households.

After the oil shock, inflation in the eurozone rose to 3.8%. Markets expect the ECB to leave interest rates unchanged at its October 29 meeting.