Banks lending more freely again in early 2017: ECB

According to central bank figures, lenders eased requirements for businesses by 2.0 per cent, after a 5.0-per cent tightening in the last quarter of 2016.
According to central bank figures, lenders eased requirements for businesses by 2.0 per cent, after a 5.0-per cent tightening in the last quarter of 2016.PHOTO: AFP

FRANKFURT (AFP) - European businesses and households enjoyed easier access to credit in the first quarter of 2017, the European Central Bank said Tuesday, reversing tighter lending conditions seen at the end of last year.

A loosening of the standards banks use to judge creditworthiness "continued across all loan categories" as banks compete for borrowers' business, the ECB said in a press release.

According to central bank figures, lenders eased requirements for businesses by 2.0 per cent, after a 5.0-per cent tightening in the last quarter of 2016.

Meanwhile, mortgage loans became significantly easier to come by, with standards 5.0 per cent looser - compared with a 1.0-per cent tightening on home loans between October and December.

Banks expect to toughen creditworthiness rules for business loans slightly in the second quarter, while keeping those for house-buyers broadly stable, the ECB found in its poll of 139 eurozone lenders between March 16 and 31.

On the other side of the equation, demand for loans "continued to increase across all loan categories," the central bank said.

With interest rates at historic lows, businesses took advantage by taking out new loans or refinancing existing ones, while a rising housing market and low interest rates also encouraged home buyers to take on mortgages.

The ECB's major interventions in the financial system - buying up tens of billions of euros in government and corporate bonds every month in an asset purchase programme (APP) along with historic low interest rates - both worked as intended to encourage banks to lend, the survey found.

But banks complain that the Frankfurt institution's measures cut into their ability to make money, as their profit margins are squeezed by low interest rates.

ECB president Mario Draghi is expected to defend his plans to continue the APP until at least the end of 2017 and keep interest rates low for even longer at a press conference following the central bank governors' meeting on Thursday.