ECB’s tight monetary policy starts to bite with corporate credit at record lows

euros prestamos

Link Securities| According to the European Central Bank’s (ECB) bank lending survey published on Tuesday, 2Q2023 saw a record fall in demand for corporate loans to its lowest level since the survey began in 2003. According to banks in the region, credit conditions tightened more than expected in the quarter under review. Banks also tightened conditions and terms further in 2Q2023

The survey also reported that the net tightening since the beginning of 2022 has been substantial, and demand for mortgages and consumer credit has declined further. In the period, high interest rates, a weakening housing market and low consumer confidence contributed negatively to mortgage loan demand.

Looking ahead to 3Q2023, banks expect a substantially less pronounced decline in demand for housing loans and consumer credit.
housing loans and consumer credit.

Assessment: everything seems to indicate that the tight monetary policy implemented by the ECB is starting to filter through to the economy, specifically to the demand for credit in the Eurozone, as intended by the institution, which aims to lower inflation in the region, slowing down demand and economic growth. It is likely that this survey will be discussed at the ECB’s Governing Council tomorrow and will be used as an argument by those in favour of ending the process of rate hikes as soon as possible.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.