The October 2018 bank lending survey – third quarter of 2018 has been published. The euro area bank lending survey (BLS) provides information on bank lending conditions in the euro area. It supplements existing statistics with information on the supply of and demand for loans to enterprises and households. The BLS provides input to the assessment of monetary and economic developments carried out by the ECB Governing Council in the process of making its monetary policy decisions.
Key points
- Credit standards ease further for loans to enterprises
- Firms and households demand more loans
- ECB’s asset purchases continue to support bank lending volumes
Credit standards for loans to enterprises eased further in net terms in the third quarter of 2018, according to the October 2018 bank lending survey (BLS). The net easing of credit standards – i.e. banks’ internal guidelines or loan approval criteria – for loans to enterprises (with a net percentage of -6%) in the third quarter follows a net percentage of -3% in the previous quarter, surpassing the expectations reported by banks in the previous survey round. In addition, credit standards for loans to households for house purchase also eased slightly (with a net percentage of -2%, compared with -8% in the previous round), and credit standards for consumer credit and other lending to households remained broadly unchanged (with a net percentage of 1%, compared with -3% in the previous round).
Across the three loan segments, competitive pressures and lower risk perceptions were the main factors contributing to an easing of credit standards, while banks’ cost of funds, balance sheet constraints and tolerance of risk were mostly neutral in terms of their contributions. For the fourth quarter of 2018, banks expect broadly unchanged credit standards for loans to enterprises and a net easing of credit standards for housing loans, consumer credit and other lending to households.
Banks’ overall terms and conditions (i.e. the actual terms and conditions agreed in loan contracts) eased for new loans to enterprises and new housing loans in the third quarter of 2018, while they remained unchanged for consumer credit and other lending to households. Margins on average loans narrowed across all three loan segments.
Net demand continued to increase across all loan categories in the third quarter of 2018. The net increase in demand for loans to enterprises was driven by the low general level of interest rates, fixed investment, inventories and working capital, and merger and acquisition activity.
Net demand for housing loans continued to be driven mainly by the low general level of interest rates, favourable housing market prospects and consumer confidence. Meanwhile, consumer confidence, spending on durable goods and the low general level of interest rates continued to contribute positively to net demand for consumer credit and other lending to households.
Note: The BLS is conducted four times a year, and published in January, April, July and October.
For further information: The October 2018 bank lending survey