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ECB-EU-EUROZONE-BANKING-CREDIT
Eurozone firms rush for credit as households hold back: ECB
FRANKFURT AM MAIN, April 28, 2020 (BSS/AFP) – Eurozone firms’ demand for
credit “surged” as the coronavirus pandemic hit, the European Central Bank
said Tuesday, while the outbreak is expected to dampen mortgage demand to
historic lows.
“Demand for loans or drawing of credit lines surged in the first quarter…
on account of firms’ emergency liquidity needs in the context of the
coronavirus pandemic and the lockdown of large parts of the economy,” the ECB
said based on a quarterly survey of 144 banks.
Meanwhile growth in demand for house purchase loans slowed sharply in
January-March compared with the previous quarter.
The poll found banks expect mortgage demand to shrink to levels “similar to
the realised level in the second half of 2008”, after the collapse of the
Lehman Brothers bank.
The regular survey found government and central bank interventions helped
hold banks back from locking down businesses’ access to credit as in previous
crises.
Compared with the financial and sovereign debt crises of the late 2000s and
early 2010s, banks imposed only a “small” tightening of their standards for
which companies should receive loans, the ECB said.
Looking ahead, banks expected further growth in business lending demand and
a “considerable net easing” of standards, with a bigger impact from government
steps to fight the pandemic such as massive guarantees for business loans.
The ECB added that its own measures, including pumping up government and
corporate bond-buying to 1.1 trillion euros ($1.2 trillion) this year and
massively extending a programme of cheap credit to banks, “had an easing
impact on bank lending conditions and a positive impact on lending volumes”.
“Firms’ demand for bank loans is going through the roof,” Pictet Wealth
Management strategist Frederik Ducrozet tweeted.
“The ECB’s credit easing measures are crucial to the ongoing financing of
the real economy”.
BSS/AFP/MMA/1548HRS