ECB Releases Results of Euro Area Bank Lending Survey in October 2021

The results reported in the October 2021 survey relate to changes observed in the third quarter of 2021 and expected changes in the fourth quarter of 2021, unless otherwise indicated. The October 2021 survey was conducted between September 20, 2021 and October 05, 2021. A total of 146 banks were surveyed and the following results emerged:

• Regarding loans to households for house purchase, euro area banks reported a net tightening of credit standards (net percentage of 8%), while credit standards for consumer credit and other lending to households also remained broadly unchanged (net percentage of -1%). Banks referred to risk perceptions related to the improved economic outlook as having a net easing impact on credit standards for loans to firms and households. Banks’ risk tolerance and their cost of funds and balance sheet situation had a neutral impact for loans to firms and consumer credit, while banks reported a net tightening impact of these factors for housing loans. In the fourth quarter of 2021, banks expect credit standards to tighten for loans to firms and for housing loans and to ease slightly for consumer credit.
• Banks’ overall terms and conditions—that is, the actual terms and conditions agreed in loan contracts—eased slightly, on balance, for loans to firms, while they tightened for housing loans and remained broadly unchanged for consumer credit in the third quarter of 2021. For margins on average loans, banks continued to report a narrowing in net terms across loan categories. Margins on riskier loans also narrowed for housing loans but widened for firms and remained unchanged for consumer credit.
• Banks reported, on balance, a slight increase in firms’ demand for loans or drawing of credit lines in the third quarter of 2021. Financing needs for fixed investment contributed positively to loan demand for the second consecutive quarter. In addition, loan demand was supported by firms’ financing needs for inventories and working capital, mergers and acquisitions, and debt refinancing and restructuring as well as the low general level of interest rates. Banks reported on balance that firms’ access to internal and alternative external financing sources had a negative impact on loan demand.
• Euro area banks’ access to retail and wholesale funding continued to improve in the third quarter of 2021, as per the surveyed banks. Banks reported that the ECB’s asset purchase program, the pandemic emergency purchase program, and the third series of targeted longer-term refinancing operations (TLTRO III) continued to have a positive impact on their liquidity positions and market financing conditions. Asset purchases and the negative deposit facility rate had a net easing impact on lending conditions and a positive impact on lending volumes, mainly for loans to firms. Also, banks reported that TLTRO III had a net easing impact on terms and conditions and a positive impact on lending volumes across all loan categories.

Related Links

• Press Release
• Survey Results

Keywords: Europe, EU, Banking, Lending, Bank Lending Survey, TLTRO, PEPP, Credit Risk, ECB