The European Central Bank said euro- area banks increased tightening of credit standards to businesses in the third quarter and expect a similar degree of tightening in the fourth.
“The impact of risk perceptions on the net tightening of credit standards increased in the third quarter of 2012 compared with the previous quarter,” the Frankfurt-based ECB said in the report today. For the fourth quarter, “banks expect a similar degree of net tightening in credit standards for loans to enterprises and households,” it said.
Lending to households and companies in the euro area contracted at the fastest pace in almost three years in September as the 17-nation currency bloc teetered on the edge of recession. ECB President Mario Draghi said on Oct. 4 that the weak outlook for the economy is weighing on credit demand.
For loans to households for house purchases, net tightening was broadly stable in the third quarter, while it declined slightly for consumer credit, the ECB said.
Euro-area banks continued to report a “pronounced” net decline in demand for loans to enterprises in the third quarter and expect a continued decline in the demand in the fourth, albeit at a slower pace, the ECB said.
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