Euro-Area Bank Lending Grows at Fastest Pace Since February 2012

Euro-area banks expanded lending at the fastest pace in more than three years in a sign that credit is starting to support the region’s recovery.

Bank loans to companies and households increased 0.5 percent in May from a year earlier, the most since February 2012, European Central Bank data showed on Friday. Loans posted annual declines every month from May 2012 until February 2015.

The ECB has deployed a range of unconventional tools to promote lending, including targeted long-term loans to banks and government-bond purchases that cut market borrowing costs. After deleveraging since the financial crisis, banks are showing an increasing appetite for supplying credit to the region’s fragile recovery.

“The lending aggregates to the real economy still have ample scope to improve in the months ahead, so financial conditions should support growth,” said Colin Bermingham, an economist at BNP Paribas SA in London.

In June, euro-area banks took up almost 74 billion euros ($83 billion) of targeted central-bank loans, known as TLTROs, that they can access if they increase lending to companies and households. Since the start of the program last year, the ECB has handed out 384 billion euros in total.

The ECB’s measures have contributed to “more favorable borrowing conditions for firms and households,” ECB President Mario Draghi said in a press conference on June 3. “The effects of these measures are working their way through to the economy and are contributing to economic growth, a reduction in economic slack, and money and credit expansion.”

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