The credit demand in the Eurozone should ease in the first quarter, as factors braking the single currency area loom larger, says the latest European Central Bank (ECB) bank survey.
«Net demand continued to increase across all loan categories in the fourth quarter of 2018, but banks expect some moderation in demand over the next three months», the ECB said in a statement.
Over the fourth quarter of 2018, low interest rates encouraged both firms and households to borrow, with businesses using cash for investment and mergers and acquisitions, while a rising housing market spurred individuals to seek mortgages.
During the first quarter of 2019, firms’ and households’ demand for loans should be higher, but banks expect some moderation in demand, forecasts the same report.
Banks’ non-performing loans have tightening impact on credit standards
With regard to the impact of non-performing loans (NPLs) on banks’ lending policies, the report shows that euro area banks’ NPL ratios had a tightening impact on their credit standards for loans to enterprises and housing loans over the past six months.
Looking forward, over the next six months, they expect a net tightening impact of their NPL ratios on credit standards across all loan categories. Banks’ NPL ratios affected their lending policies over the past six months mainly through their impact on access to market financing.
Original story: The Express Tribune | AFP
Edition: Prime Yield