The bank tightens the conditions of the credits to compensate the risk


The European Central Bank (ECB) notice that hethe banks have hardened much more in the third quarter the standards of loans to companies and households for the purchase of a home and for consumption. after making your latest survey on bank creditthe ECB has reported this Tuesday that 19% of the banks surveyed said they had strengthened the conditions of loans to companies in the third quarter (16% tightened them in the second quarter).

A 32% of banks respondents said they had tightened the conditions of loans to households for the purchase of a home (2% tightened them in the second quarter), making it the largest tightening of the criteria for granting mortgage loans since the fourth quarter of 2008, according to the ECB. 21% of banks in the euro zone tightened consumer credit conditions in the second quarter (9% tightened them in the second quarter).

The ECB began to raise interest rates in July, for the first time in eleven years, and increased them again in September, so they now stand at 1.25%. The Governing Council meets on Thursday to decide on a new increase in the price of money, of 75 basis points, according to the markets, to curb inflation of almost 10% in the euro area.

The demand for loans or lines of credit from companies increased in the third quarter due to the increase in production costs

The banks they have tightened their credit standards for companies “in the context of economic slowdown and rising recession fears,” the ECB said. Banks see too risks to the economic outlook and for specific companies and industrial sectors and, in addition, they have less tolerance for risk. Credit standards are banks’ internal guidelines or criteria for approving loans.

With the rises in interest rates, the financing costs of the banks and the situation of their balance sheets also had an impact on the tightening of the conditions for granting loans to companies. Eurozone banks expect to further tighten the terms of their corporate, mortgage and consumer loans in the fourth quarter.

The demand for loans or business lines of credit raised in the third quarter due to the increase in production costs, of inventories due to the drop in demand and as a precaution due to bottlenecks. But the increases in interest rates are already beginning to reduce the demand for mortgage loans and household consumer loans.

The ECB conducted the survey, which it conducts four times a year to better understand banks’ lending, between September 16 and October 4 of 153 banks in the euro zone.

The criteria for granting mortgage loans were tightened in Germany (39%), in Spain (40%), in France (42%) and Italy (9%)

standards of business credit they have tightened in Germany (19%), Spain (25%), France (8%) and Italy (36%). The criteria for granting the mortgage credits they tightened in Germany (39%), in Spain (40%), in France (42%) and Italy (9%). The conditions of the consumer loans they have become more severe in Germany (37%), Spain (33%), and Italy (8%), but have remained in France.

Business loan demand rose in the third quarter in Germany, France and Italy, but fell in Spain. Demand for mortgage loans fell in the four largest euro area countries and for consumer loans rose in France, but fell in Germany, Spain and Italy. The completion of ECB debt purchases have had a negative impact on banks’ liquidityin the financing conditions of the market and in the profitability of the last six months.

Also, the euro area stopped having negative deposit rates in July, are now at 0.75%. The negative deposit rate had previously had a positive effect on corporate and household loan volumes, but was contributing negatively to their profitability. Also the positive impact of long-term liquidity injections has been reduced of the ECB on the financial situation of banks and loan volumes, as well as on the conditions of loans to companies and households compared to the second quarter.


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