Loan demand by firms supported by fixed investment
Bank lending conditions reflect continued support by monetary, fiscal and supervisory authorities
According to the
Banks' overall terms and conditions – i.e. the actual terms and conditions agreed in loan contracts – eased, on balance, for loans to firms and households in the second quarter of 2021. This was mainly on account of narrower margins for average loans. Meanwhile, banks reported broadly unchanged or wider margins for riskier loans in net terms.
Banks reported, on balance, a moderate increase in firms' demand for loans or drawing of credit lines in the second quarter of 2021 (see Chart 2). For the first time since the third quarter of 2019, firms' financing needs for fixed investment contributed positively to loan demand, suggesting that firms may become less reluctant to invest. By contrast, their financing needs for working capital remained unchanged owing to firms' available liquidity buffers and the likely recovery in revenues given the improving economic situation. Banks reported a strong net increase in demand for housing loans in the second quarter of 2021. Higher consumer confidence, favourable housing market prospects and the low general level of interest rates all contributed to the net increase in demand. For consumer credit and other lending to households, loan demand also increased in net terms, largely driven by higher consumer confidence and spending on durables. In the third quarter of 2021, banks expect net demand to increase further for loans to firms and households.
Euro area banks' access to retail and wholesale funding continued to improve in the second quarter of 2021, according to the banks surveyed. Banks also reported that non-performing loan (NPL) ratios had a moderate net tightening impact on their credit standards for loans to enterprises and a broadly neutral impact on credit standards for loans to households in the first half of 2021. In addition, banks indicated a moderate net tightening of credit standards for loans to firms across the main economic sectors in the first half of 2021, reflecting both the moderate net tightening of credit standards for loans to all firms in the first quarter and the broadly unchanged credit standards in the second quarter. Euro area banks also indicated a net increase in demand for loans or credit lines for most economic sectors. Finally, euro area banks reported that government guarantees related to the coronavirus (COVID-19) continued to support banks' lending conditions for loans to firms, while demand for loans with guarantees declined in net terms in the first half of 2021.
The euro area bank lending survey, which is conducted four times a year, was developed by the Eurosystem in order to improve its understanding of bank lending behaviour in the euro area. The results reported in the
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