Fewer eurozone banks are tightening credit

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The percentage of eurozone banks tightening credit standards dropped to 21 percent from 43 percent in the first quarter of 2009, reports the ECB.

Frankfurt – The percentage of eurozone banks tightening loan standards for business and households has dropped sharply the past three months but credit is still hard to come by, the European Central Bank said on Wednesday.

The ECB's lending survey for the second quarter of 2009 showed that the net percentage of banks tightening credit standards had dropped to 21 percent from 43 percent in the first quarter.

That nonetheless meant that more of the 118 eurozone banks polled were making it harder to obtain credit than those who had left standards unchanged.

None of the banks reported that they had eased lending conditions.

The figure showed that the pace of tightening was less steep than in previous surveys but that the trend was still oriented higher, even though it was expected to flatten out further in the third quarter.

The ECB quarterly report in January put the net percentage of banks reporting tighter credit standards at 64 percent, just below a peak of 65 percent in October 2008.

The last time the net percentage was oriented lower, indicating easing credit conditions, was a three percent decrease in July 2007, just before the international financial crisis erupted.

The report came as the ECB's vice-president Lucas Papademos urged banks to increase lending to boost the eurozone economy amid concern that tight credit could choke off a gradually emerging upswing in the 16-country zone.

"Banks must realise that to help the economy sufficiently is in their long-term interests," Papademos told German business daily Handelsblatt.

"It is important that banks find the right balance between reinforcing their balance sheets and providing ample credit," he said.

Papademos' comments came after ECB statistics showed on Monday that eurozone lending remained weak, in particular to businesses.

In Germany, the biggest eurozone economy, the Ifo economic research institute said credit constraints sharpened markedly in July with 45.1 percent of firms polled saying bank lending policies were restrictive, up from 42.4 percent in a previous survey.

Complaints of tighter credit came from all the surveyed sectors, including manufacturing, construction, wholesaling and retailing, Ifo said.

In addition, "in the assessment of firms of all sizes, access to credit has become clearly more difficult," it added.

AFP / Expatica

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