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Euro zone banks to keep tightening access to credit, ECB survey shows

·1-min read
FILE PHOTO: Sun sets over the skyline and ECB headquarters in Frankfurt

FRANKFURT (Reuters) - Euro zone banks tightened access to credit in the second quarter and will continue to tighten lending standards during the current quarter because their tolerance for risk has declined, a European Central Bank survey showed on Tuesday.

With Russia's war in Ukraine sapping confidence and dragging the bloc closer to recession, banks have become pickier in granting loans, which could reinforce the downturn.

"Banks reported that risk perceptions related to the economic outlook, industry or firm-specific situation and banks’ decreased risk tolerance had a strong tightening impact on credit standards," the ECB said.

In the second quarter, credit demand from companies was up as firms had to keep financing investment. But banks indicated a "considerable" further tightening of their credit standards.

"In the third quarter of 2022, euro area banks expect a net tightening of credit standards for loans to firms of a similar magnitude to the second quarter," the ECB said.

Banks also reported a "strong" net tightening of credit standards for housing loans and a moderate net tightening for consumer credit in the second quarter.

In the current quarter, banks expect a further net tightening of credit standards for all lending to households while a "strong" net decrease in housing loan demand is also likely.

(Reporting by Balazs Koranyi; Editing by Francesco Canepa)

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