Credit standards for loans to non-financial corporations continued to ease in the third quarter, although at a slightly less rapid rate than in the previous quarter. The European Central Bank’s October 2014 bank lending survey reported a net percentage of banks (the difference between the number of banks that tightened and those that eased standards) of -2 percent in the third quarter; the figure was -3 percent in the second. However, bank credit officers predict it will be -6 in the fourth quarter.
While these numbers may appear small, the historical average since 2003 has been a positive 14 percent, meaning many more banks were tightening than were easing credit standards.
Factors related to banks’ cost of funds and balance sheet constraints continued to contribute slightly to an easing of credit standards for loans to enterprises, mainly driven by euro area banks’ liquidity position continuing to strengthen and the ongoing improvement in banks’ access to market funding. Banks’ capital position had a marginally tightening impact.
There was an increase in banks reporting positive net loan demand from corporates (the difference between the sum of the percentages of banks reporting an increase and that of banks reporting a decline in demand) to 6 percent, up from 4 percent the previous quarter.
This was mainly driven by increased financing needs for mergers and acquisitions and by debt restructuring. Financing needs related to fixed investment dampened demand for loans to euro area enterprises. The ECB said that this probably reflects an increase in uncertainty regarding the economic recovery. Banks expect in net terms a continued increase in demand across all loan categories for the fourth quarter of 2014.
Demand was uneven throughout the Eurozone. Banks in Germany, France and Spain reported a net increase in demand for loans to enterprises, whereas Dutch banks indicated unchanged net demand. In Italy net loan demand declined.