Lending standards dip in the Eurozone as banks open up their coffers in response to the European Central Bank's negative interest rates

 
Jake Cordell
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Banks borrowing in euros found the hurdles they had to jump through at the start of the year a little lower, according to the European Central Bank (ECB)
Banks borrowing in euros found the hurdles they had to jump over at the start of the year a little lower, according to the European Central Bank (ECB) (Source: Getty)

Businesses across the Eurozone are finding it easier to secure bank loans, according to the European Central Bank (ECB)’s quarterly lending survey, released this morning, which also shows that negative interest rates are encouraging banks to lend more.

Banks across the single currency bloc said they were loosening their standards for businesses applying for loans in the face of growing competition - meaning they were more likely to dish money out to companies that asked for it.

The survey, which measures the difference between the proportion of banks that are tightening their standards and the proportion which are loosening them, came in at a score of minus six per cent - meaning more banks were easing off - for the first quarter of the year, compared to minus four per cent at the end of 2015.

Read more: Interest rates could be going even lower in the Eurozone

“Improving loan supply conditions for enterprises and the continued increase in loan demand across all loan categories are supporting the ongoing recovery in loan growth,” the ECB said.

Banks across the Eurozone said that the ECB’s negative deposit rate - which charges banks an annual rate of 0.4 per cent to lodge funds with it overnight - was encouraging them to lend more, though it was hitting their loan margins and profitability.

At the same time as lending more to companies, banks were tightening the standards which they apply to individuals and households taking out loans - especially for buying a home. Fresh off the back of the EU’s mortgage credit directive, the balance of banks tightening up their requirements for home buyers jumped to four per cent from minus seven per cent.

Read more: Negative interest rates are sparking a gold rush

Accordingly, the number of rejected applications from businesses fell in the first quarter, while the number of individuals turned away increased.

Banks said they expect to continue loosening restrictions for business lending over the next three months.

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