“Perceived risks to the economic outlook contributed to tighter credit standards,” the ECB said. “Banks also cited the current high level of geopolitical uncertainty and trade risks as reasons for discriminating across sectors or firms when issuing new loans, and several banks indicated intensified monitoring and analysis.”
Similarly, banks’ rising risk perceptions were also the main driver of the net tightening for consumer credit, it said.
For the fourth quarter, “banks expect credit standards to remain broadly unchanged for firms, tighten slightly for housing loans and tighten further for consumer credit,” it said.
As a result of the tighter credit standards, banks also reported a net increase in the share of loan applications that were rejected across all loan categories, with the largest increase of rejection rates coming in consumer credit.
Banks also reported a slight net increase in businesses’ demand for loans or credit lines, but demand remained weak overall, it said.
“Loan demand was supported by declining lending rates and by increased financing needs for debt refinancing or debt restructuring,” it said — but several banks reported that global uncertainty and related trade tensions are weighing on loan demand.
Demand for consumer credit and other household lending was unchanged in the quarter, “with declining interest rates and other factors supporting demand being offset by lower consumer confidence,” it said.
In the fourth quarter, banks expect loan demand from firms to remain unchanged, while demand for consumer credit and residential housing loans are expected to rise.