banks continue to tighten credit conditions

Frankfurt (awp / afp) – The conditions for granting bank loans to the private sector continued to deteriorate in the fourth quarter of 2020, the development of the pandemic affecting the risk profile of borrowers, the European Central Bank said on Tuesday.

Credit conditions defined by banks to lend to companies have tightened especially in France, Spain and Germany, while they have remained stable in Italy, details a quarterly study by the ECB.

Credit standards to households, to access housing or consumer goods, have also tightened, but at a slower pace than in the third quarter, adds the document.

This trend comes against a backdrop of “deteriorating general economic outlook”, “increased credit risk for borrowers” and “lower risk tolerance” as delinquencies increase, according to the survey carried out in December with 143 establishments.

The study then appears that Thursday, the Frankfurt institute should confirm the monetary easing measures taken in December to allow businesses and households to continue to find financing under good conditions and thus support the economy.

From October to December, the real conditions applied for loans to businesses and households deteriorated, the study adds.

After reaching a historic level in the second quarter, net demand for loans also contracted, especially on the business side where liquidity mattresses had been built up in the previous quarters.

On the household side, net demand for home loans continued to recover, continuing to catch up after the spring containment measures were lifted, while it declined slightly for consumer loans.

Banks expect to tighten credit standards again in the first quarter of 2021, as public guarantees surrounding loans linked to the economic impact of Covid-19 will continue to apply.

At the same time, net demand for loans is expected to increase, except for home loans.

afp / al

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