The euro area bank lending survey

Overview of results

The renewed net tightening follows unchanged credit standards for loans to firms in the third quarter of 2024 and is the most pronounced net tightening since the third quarter of 2023. It was driven by higher perceived risks related to the economic outlook and by banks’ lower risk tolerance. This was mainly owing to banks in Germany and France in an environment of increased political uncertainty, whereas credit standards eased in Italy. The area-wide net tightening was higher than expected by banks in the previous survey round (4%). For the first quarter of 2025, banks expect a further net tightening of credit standards for loans to firms (10%, slightly above the historical average).

Banks reported broadly unchanged credit standards for loans to households for house purchase after three quarters of easing, and a further net tightening for consumer credit (net percentages of 1% and 6%; see Overview table). For housing loans, while competition from other banks had an easing impact on credit standards, banks’ risk tolerance and risk perceptions had a tightening impact. Across the largest euro area countries, banks in France reported a net easing while banks in Germany and Italy reported a net tightening. The broadly unchanged credit standards for euro area housing loans contrasts with the strong net easing that banks had expected in the previous quarter (-12%). For credit standards on consumer credit and other lending to households, risk perceptions and banks’ risk tolerance were again the main drivers of the net tightening, reflecting concerns about deteriorating asset quality in this loan segment. Credit standards for consumer credit tightened in Germany, France and Spain, while remaining unchanged in Italy. The tightening was larger than banks had expected in the previous quarter (3%) and was around the historical average (5%). For the first quarter of 2025, banks expect credit standards for housing loans and consumer credit to tighten (2% and 7% respectively).

Firms’ net demand for loans continued to increase slightly in the fourth quarter of 2024, while remaining weak overall (net percentage of 3%; see Overview table). The small increase in loan demand was driven mainly by declining interest rates, with fixed investments having a still-muted impact after a small positive contribution in the previous quarter. The overall muted demand reflects the continued weak economic situation, especially in some investment-intensive sectors of the economy. Some banks also referred to economic and (geo-)political uncertainties as a dampening factor for firms’ loan demand. Firms’ inventories and working capital made a small positive contribution. While banks in Germany, Spain and Italy reported an increase in loan demand, banks in France reported a net decrease. For the first quarter of 2025, banks expect broadly unchanged loan demand (-1%).

Net demand for housing loans continued to increase strongly, while consumer credit demand increased slightly (net percentages of 42% and 2%; see Overview table). The net increase in housing loan demand was driven mainly by declining interest rates and, to a lesser extent, by housing market prospects. It follows a similarly strong increase in the previous quarter (39%) and was in line with banks’ expectations in the previous quarter (44%). It was also broad based across euro area countries, substantiating still further the signs of a rebound from the strong declines in housing loan demand over the tightening cycle. Consumer credit demand was supported by declining interest rates, whereas consumer confidence, spending on durables and the use of alternative finance from other banks and non-banks dampened demand. The net increase in demand for consumer credit was lower than that expected by banks in the previous quarter (11%). For the first quarter of 2025, banks expect demand in both categories to increase further (31% for housing loans and 12% for consumer credit).

Banks’ overall credit terms and conditions remained broadly unchanged for loans to firms and consumer credit, while they eased strongly for housing loans. For loans to firms, the easing impact of lower lending rates and narrower margins on average loans was offset by stricter collateral requirements and other terms and conditions, such as loan covenants, to compensate for higher perceived risks. For housing loans, lending rates and margins on average loans were the main drivers of the net easing. For consumer credit terms and conditions, while lending rates had an easing impact, loan margins widened somewhat.

Banks reported a net increase in the share of rejected applications for loans to firms and consumer credit, while they reported a small net decrease for housing loans.

The January 2025 survey contained several ad hoc questions.

• Euro area banks’ access to funding worsened somewhat for retail funding, money markets and debt securities in the last quarter of 2024. Over the next three months, banks expect access to funding to remain broadly unchanged across all market segments.

• In response to new regulatory or supervisory requirements in 2024, euro area banks reported a net increase in their required capital as well as increases in their liquid and risk-weighted assets. Banks also reported a net tightening impact on credit standards stemming from the requirements, especially for loans to firms, with further, substantial net tightening expected for 2025.

• Euro area banks reported a net tightening impact of NPL ratios and other indicators of credit quality on their credit standards for loans to enterprises and consumer credit in the second half of 2024, the largest impact since the height of the pandemic and the period of balance sheet clean-up in 2014-17. The net tightening impact on terms and conditions was more moderate. Higher perceived risks and, to a lesser extent, lower risk tolerance were the most