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Frankfurt (Germany) Apr 20 (.) .- The European Central Bank (ECB) observes that banks have “moderately” tightened the standards of loans to companies in the first quarter, although they have relaxed the criteria for approving loans a bit to households for the purchase of a home.
After conducting its survey on bank credit, the ECB reported on Tuesday that banks have tightened the conditions of consumer loans.
Credit standards are the internal guidelines of banks or the criteria for approving loans.
The ECB conducted the survey between March 11 and March 26 of 143 banks in the euro area.
Banks had further tightened credit standards in the fourth quarter of 2020, both for companies and households.
7% of the surveyed banks said they had tightened the conditions of loans to companies in the first quarter (25% in the fourth quarter).
2% of banks said they had relaxed the conditions for mortgage loans (7% of the surveyed banks tightened their mortgage loan standards in the fourth quarter).
5% of banks moderately tightened standards for consumer loans and other loans to households (3% in the fourth quarter).
Banks observe the risk that applicants for a loan will not be able to repay it and are less tolerant of risk, but the strong competition between them leads some to relax their standards.
The intermediation margins for loans to companies and mortgages have been reduced, although they are higher in the riskier loans.
Banks expect to tighten credit conditions for companies and households in the second quarter of this year.
Demand for business loans has dropped in the first quarter of the year as companies in the sectors most affected by the pandemic “tend to postpone their investments.”
In addition, companies have sufficient liquidity due to the support of central banks and governments, especially SMEs.
Banks also said demand for mortgage and consumer loans has declined in the first quarter, but they expect demand for business and household loans to increase in the second quarter.
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