Fewer eurozone banks are making it harder to borrow money, the European Central Bank said yesterday, and a key turning point is in sight later this year.
Overall, however, banks are still cautious about extending the credit needed for a sustained economic recovery, the ECB added.
The ECB’s Bank Lending Survey for the third quarter of 2009 found that a net eight per cent of those polled tightened credit standards for businesses, compared with 21 per cent in the second quarter, “bringing the net tightening close to a halt”.
A net tightening means more banks were applying stricter standards to loan requests than those that said they had eased loan conditions.
For household purchases and consumer credit, the data showed a net tightening of 14 per cent and 13 per cent respectively, down from 22 and 21 per cent in the previous survey, the ECB said.
Looking ahead to the fourth quarter, a slender net one per cent of banks said they expected to ease lending conditions for businesses, which would mark an important shift in eurozone credit conditions.
Overall tightening of standards for households should ease further as well, the study found.
On Tuesday, however, the ECB said eurozone bank lending to the private sector had contracted for the first time on record in September, a stark reminder that any recovery is fraught with uncertainty.
September lending contracted by 0.3 per cent, an ECB spokesman said, the first time the figure was negative since the ECB’s records began in January 1992.
The eurozone entered recession in the second quarter of 2008 but economists expect the 16-nation economy to record growth in the second half of this year.
The ECB noted yesterday that “competition from other banks contributed for the first time since the second quarter of 2007 to an easing of credit standards, hence moving back to the typical impact of competition before the financial turmoil”.
That erupted when the US investment bank Lehman Brothers collapsed in September 2008.
The ECB warned, however, that “it needs to be kept in mind that the cumulative net tightening during the financial turmoil has not yet started to reverse itself and remains very substantial”.
That and rising unemployment could still hamper a sustained eurozone recovery, economists say.
Another positive development was that more businesses could secure market-based financing, such as by issuing debt securities, a sign of improved market conditions, the ECB said.