Eurozone debt crisis weighed on bank lending: ECB

28th July 2010, Comments 0 comments

The eurozone debt crisis weighed on bank lending in the second quarter of the year, the European Central Bank said on Wednesday, even though mortgage lending showed a strong increase in June.

In its quarterly lending survey of 120 eurozone banks, the ECB said a net 11 percent reported having tightened credit standards for businesses, up sharply from a net 3.0 percent in the first quarter of 2010.

The bank's own forecast for the second quarter was for a slight improvement to 2.0 percent.

Loans to households were slightly less affected, with a net 10 percent of banks saying they had tightened conditions, the same level as in the first quarter of the year.

There however, the forecast had also been for a decline to 2.0 percent.

A net result means that in the first case, 11 percent more banks said they had tightened standards than those that left conditions unchanged or loosened them.

Commercial banks pointed to a deterioration of their balance sheets and access to wholesale funding as factors behind the tighter lending standards, while they felt credit risks were better and companies' economic conditions had improved, the ECB said.

"For the second quarter of 2010, possibly reflecting the renewed financial market tensions following concerns about sovereign risk, banks generally reported a deterioration in their access to wholesale funding across all segments," it explained.

In the coming three months, a net 10-20 percent of the banks expected access to wholesale funding on money or bond markets to worsen, the ECB added.

Demand for credit from both businesses and households was said to have recovered further from the previous survey, meanwhile.

On Tuesday, that was seen particularly in mortgage lending when the ECB released June data on eurozone loans to the private sector that showed a rise of 3.4 percent in home loans, the biggest increase since September 2008.

© 2010 AFP

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