April 9, 2019 / 9:35 AM / 5 months ago

Euro zone banks expect to ease business loan standards in second quarter: ECB

FRANKFURT (Reuters) - Euro zone banks expect to ease standards for business loans and consumer credit as competition remains fierce and demand slows in Italy and Spain, a European Central Bank survey showed on Tuesday.

With economic growth slowing and recession fears rising, ECB policymakers recently approved a new set of ultra-cheap loans to commercial banks, fearing they would halt the flow of credit, exacerbating the downturn.

But the results of the survey suggest that banks are not planning to make it any harder for businesses to get loans, blaming high competitive pressure.

“For the second quarter of 2019, banks expect an easing of credit standards for loans to enterprises and consumer credit, and a further tightening of credit standards for housing loans,” the ECB said.

But credit demand cooled among consumers and companies in Spain, where general elections will be held this month, and from businesses in recession-struck Italy.

For the euro area as a whole, banks expect net demand for housing loans, consumer credit and business loans to rise in the three months to June.

Credit standards — banks’ internal guidelines or loan approval criteria — and terms and conditions on new credit remained broadly unchanged, the survey showed.

Italian banks, however, said they were tightening lending terms for a second straight quarter, blaming a higher cost of funding and a heightened perception of risk.

Borrowing costs for the Italian government, which drive the cost of funding for banks, have risen since a populist coalition took power last year and disclosed plans to run higher budget deficits.

Reporting by Balazs Koranyi; editing by Francesco Canepa, Larry King

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