Eurozone banks expect credit standards to tighten and net demand for loans to firms and households in the second quarter, results of a quarterly survey by the European Central Bank showed Tuesday.

The criteria for approving home loans eased slightly in the first quarter, while the credit standards for consumer credit and other lending to households tightened, the latest euro area bank lending survey showed.

Banks attributed the tightening mainly to risk perceptions related to borrowers’ creditworthiness and a lower risk tolerance.

The easing of credit standards for home loans were largely due to competitive pressure.

Banks expect expect credit standards to tighten for loans to firms and households in the second quarter, the survey said.

Demand for loans from firms declined further in the first quarters as businesses in sectors more hit by the coronavirus pandemic postponed their fixed investment plans.

Meanwhile, the availability of liquidity buffers and direct government support, especially to small and medium-sized enterprises, meant firms did not demand additional loans for working capital.

Demand for housing loans decreased in the first quarter mainly due to weaker consumer confidence, while the low general level of interest rates and housing market prospects continued to support underpin demand.

The ECB survey showed that banks expect net demand to increase for loans to firms and households in the second quarter.

Further, the survey found that the ECB’s asset purchase program, the pandemic emergency purchase program and the third series of targeted longer-term refinancing operations all had a positive impact on banks’ liquidity positions and market financing conditions.

The April 2021 BLS survey round was conducted between March 11 and 26.

The material has been provided by InstaForex Company –

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