Euro area credit standards tightened by most since 2011 in first quarter
Lenders in the single currency area tightened their credit standards at the start of 2023 at the quickest pace since the 2011 debt crisis, the results of a survey revealed.
The European Central Bank's Bank Lending Survey revealed tighter conditions for both households and businesses albeit less so than in the last quarter of 2022 in the case of the former.
Higher risks around the economic outlook, a reduction in risk tolerance, a perceived higher risk and increased costs of funds were all cited as reasons by lender, together with a deterioration in balance sheets.
According to Melanie Debono at Pantheon Macroeconomics, the survey showed that higher funding costs were a "far less" important factor than perceptions of risk.
"Still, with inflation likely to fall back after the small uptick in April, and banks thinking that the next tightening in lending standards will be less than in Q1, we think that after this week’s probable 25bp hike, the Bank will only raise rates once more, by 25bp in June," Debono said.