Eurozone banks likely to tighten access to corporate credit, reveals ECB survey

The eurozone banks are expected to tighten access to corporate credit for the first time in two-and-a-half years as they remain worried about the risks of negative interest rate gulping down the companies’ profits, the European Central Bank’s Bank Lending Survey showed Tuesday.

The banks, surveyed last month, cited lower risk tolerance as a tightening factor while deciding which companies would get a loan or credit line in the three months to September. Also, they also cited their discomfort with the ECB's negative deposit rate, effectively a charge on banks' excess deposit with the central bank.

In the ECB survey of 141 lenders, it was seen that banks had stopped easing credit standards for corporate enterprises during the three months ended September, while a small proportion of them prepares to tighten them in the coming quarter.

"Competitive pressures and, to a lesser extent, lower risk perceptions continued to have an easing impact on credit standards on loans to enterprises, while banks' cost of funds and their willingness to tolerate risk had a broadly neutral impact," the survey report said.

In the third quarter, credit conditions for business loans were eased in Germany, while they remained unchanged in France, Italy, Spain and the Netherlands. Further, France and Spain eased credit standards for housing loans, while Italy and the Netherlands left them unchanged. Germany continued to tighten access to mortgage loans, reports showed.

Meanwhile, lenders still expect demand to grow in the last three months of the year, Reuters reported.