Eurozone banks are tightening lending conditions for both businesses and households even as demand falls as the sovereign debt crisis drags on, the European Central Bank found yesterday.

In its latest quarterly Bank Lending Survey, the ECB said that a quarter of banks expect to tighten the criteria that businesses must meet to take out loans. Almost as many banks said they would also tighten conditions for loans to households for house purchases.

At the same time, demand for such loans both from households and firms has declined, the survey found.

The poll was conducted between December 19 and January 9 and so will not fully take into account the unprecedented injection of nearly half a trillion euros of liquidity into the banking system by the ECB at the end of last year.

The data will, however, heighten concerns about a possible credit crunch in the 17 countries that share the euro. Banks already tightened lending conditions substantially in the final quarter of 2011, the ECB survey showed.

A net 35 per cent of banks did so from October to December, compared with 16 per cent in the preceding three months.

In the case of mortgage loans, as many as 29 per cent of banks said they had tightened conditions in the fourth quarter of 2011, up from 18 per cent in the preceding quarter .

“Similarly to corporate loans, increased cost of market funding and balance sheet constraints were put forward as key driving factors behind these developments,” it said.