Credit standards for all loan categories continued to ease in net terms in the fourth quarter of 2014, according to the January 2015 bank lending survey carried out by the European Central Bank.

Euro area banks reported a net easing of credit standards on loans to non-financial corporations (specifically, a net percentage of -5 per cent, after -2 per cent in the previous quarter) ,which was in line with banks’ expectations as expressed in the previous survey round.

Banks continued to ease credit standards for loans to households in net terms with overall net easing supported by ongoing competitive pressures across all loan categories. Concerning terms and conditions, banks indicated a further considerable narrowing of margins on average loans, while reporting in net terms only a slight narrowing of margins on riskier loans suggesting a further intensification in banks’ risk differentiation.

Rising net loan demand continued to be reported in particular for loans to non-financial corporations and for consumer credit, while the reported increase in net demand for housing loans stabilised at elevated levels.

For loans to enterprises, financing needs related to fixed investment in particular contributed to the increase in net loan demand by euro area enterprises in the fourth quarter of 2014, recording the first significantly positive contribution since mid-2011.

In addition, euro area banks’ access to funding further improved in net terms for all main market instruments and for short-term retail deposits. Banks also provided more indications that recent regulatory and supervisory actions are having a positive impact, such as improvements in banks’ funding conditions and an easing in overall lending conditions.

In response to the additional ad hoc questions on the targeted longer-term refinancing operations (TLTROs), banks indicated that they would use these funds predominantly for granting loans as well as for substitution of other funding sources. The impact on loan supply is expected to largely translate into a narrowing of lending margins, but the January 2015 survey round also provided the first indications of an easing of credit standards.

In all, 137 banks take part in the Bank Lending Survey, which is conducted four times a year.