BRUSSELS/FRANKFURT/PARIS (dpa-AFX) - Eurozone banks plan to tighten credit standards in the second quarter amid geopolitical tensions, energy developments and higher funding costs, the Bank Lending Survey results from the European Central Bank showed Tuesday.
Loan approval criteria for enterprises, households for house purchases and consumer credit were tightened in the first quarter, driven by higher perceived risks and lower risk tolerance. Banks also intend to tighten the conditions in the second quarter.
The survey revealed that perceived risks to the economic outlook and lower risk tolerance of banks were the main contributing factors, with banks suggesting a dedicated open-ended question that geopolitical and energy developments exerted tightening pressure.
Further, banks reported a slight net fall in demand for loans or credit lines to firms in the first quarter. Demand for housing loans was unchanged and demand for consumer credit and other lending to households declined strongly.
Banks forecast that loan demand from firms will decrease further in the second quarter, alongside continued declines in housing loans and consumer credit.
The bank said nearly half of euro area banks use securitization to grant new loans, manage credit risk and enhance liquidity and funding, relying on non-bank financial entities to purchase securitized loans. The survey was conducted among 16 banks between March 19 and April 7.
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