ECB Says Company Loan Standards Tighten on Concerns Over Outlook

(Bloomberg) -- Credit standards for companies in the euro area unexpectedly tightened in the second quarter, the European Central Bank said on Tuesday, amid concerns over a darkening outlook for the 19-nation economy.

Banks’ approval criteria for consumer credit and other household lending also tightened, according to the ECB’s Bank Lending Survey. The results are likely to feed expectations that policy makers will signal more easing or even cut interest rates at their meeting on Thursday, after President Draghi promised more stimulus unless the economic situation improves.

“Lower risk tolerance and, for loans to enterprises, heightened risk perceptions, accompanied by higher cost of funds and balance sheet constraints, contributed to the tightening of credit standards across loan categories,” the ECB said in a statement. In the previous survey round, banks had expected a slight net easing of conditions for enterprises.

Credit standards tightened even as net demand increased. For the third quarter, banks expect standards to remain unchanged for loans to companies and mortgages, and to ease for consumer credit, according to the ECB.

To contact the reporter on this story: Piotr Skolimowski in Frankfurt at pskolimowski@bloomberg.net

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Jana Randow

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