ECB published results of the quarterly lending survey conducted on 143 banks in the euro area. The results reported in the survey relate to changes observed in the fourth quarter of 2020 and expected changes in the first quarter of 2021, unless otherwise indicated. The loan categories include loans to enterprises, loans to households for house purchase, and consumer credit and other lending to households. In addition to results for the euro area as a whole, the report also presents results for the four largest euro area countries—namely, Germany, France, Italy, and Spain. Bundesbank has separately published the results of the quarterly lending survey conducted on 34 banks in Germany. The ECB report reveals a net tightening of the credit standards on loans to firms in EU in the fourth quarter of 2020.
The ECB lending survey included a number of ad hoc questions that address the impact of various factors on changes in banks’ lending conditions and demand for loans; these factors include the impact of the situation in financial markets on banks’ access to retail and wholesale funding, the impact of new regulatory and supervisory requirements on banks’ lending policies, the impact of banks’ non-performing loan ratios on their lending policies, and the impact of government loan guarantees related to the COVID-19 pandemic. Euro area banks indicated that regulatory or supervisory actions continued to strengthen banks’ capital position and had a strong easing impact on their funding conditions in 2020. Banks also reported that supervisory or regulatory actions continued to have a net tightening impact on their credit standards across all loan categories. Euro area banks reported that nonperforming loans had a tightening impact on credit standards and on terms and conditions for loans to enterprises and consumer credit in the second half of 2020 (and a broadly neutral impact for housing loans). Risk perceptions and risk aversion were the main drivers of the tightening impact of nonperforming loan ratios.
The survey revealed that the net percentage of banks reporting a tightening of credit standards for loans or credit lines to firms was somewhat higher than in the previous round. Credit standards for loans to households also tightened but at a slower pace than in the previous quarters of 2020. Banks referred to the deterioration of the general economic outlook, increased credit risk of borrowers, and a lower risk tolerance as relevant factors for the tightening of their credit standards for loans to firms and households. Looking at a sectoral breakdown, respondent banks indicated a net tightening of credit standards for loans to enterprises across all main sectors of economic activities in the second half of 2020. The net tightening was most pronounced for loans to firms in the commercial real estate and the wholesale and retail trade sectors. Looking forward, in the first quarter of 2021, banks expect credit standards to continue to tighten for loans to firms and households. Also, in the first quarter of 2021, banks expect net demand for loans to firms, and for consumer credit, to increase and net demand for housing loans to decline.
Keywords: Europe, EU, Banking, Bank Lending Survey, COVID-19, Credit Risk, Basel, NPL, Bundesbank, ECB
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