April 2021 Euro Area Bank Lending Survey

April 2021 euro area bank lending survey (BLS) published on 20 April 2021 by the European Central Bank. According to survey, it is stated that credit standards – i.e. banks’ internal guidelines or loan approval criteria – tightened moderately for loans or credit lines to enterprises (net percentage of banks standing at 7%) in the first quarter of 2021. Credit standards eased slightly in net terms for loans to households for house purchase (net percentage of -2%) and tightened moderately further in net terms for consumer credit and other lending to households (net percentage of 5%). It is highlighted in the survey that banks referred mainly to risk perceptions related to borrowers’ creditworthiness and a lower risk tolerance as factors having a tightening impact on their credit standards. By contrast, competitive pressure contributed mostly to an easing of credit standards. In the second quarter of 2021, banks expect credit standards to tighten for loans to firms and households.

Banks reported, on balance, a further decline in firms’ demand for loans or drawing of credit lines in the first quarter of 2021, i.e. a larger percentage of banks indicated a decline rather than an increase in firms’ loan demand (see Chart 2). Financing needs for fixed investment continued to dampen loan demand as firms, especially in sectors more affected by the pandemic, tended to postpone investment. In addition, firms did not, on balance, demand additional financing for working capital, reflecting the availability of liquidity buffers and direct government liquidity support, especially to small and medium-sized enterprises. Banks also reported a net decrease in demand for housing loans in the first quarter of 2021. While consumer confidence dampened demand for housing loans, demand continued to be supported by the low general level of interest rates and, to a lesser extent, housing market prospects.

As the leading monetary authority in the EU, the European Central Bank provides consistent and standardised supervision throughout the euro area with a focus to ensure price stability. As ECOPNET (European Cooperation & Partnership Network) we closely follow the latest surveys and reports published by the European Central Bank under our Trade Regulations Working Group to guide our partners on recent decisions and trends related to the euro area economy and beyond.

It is underlined in the survey that Euro area banks’ access to retail and wholesale funding continued to improve in the first quarter of 2021, according to the banks surveyed. The BLS also asked banks to report on the impact of the ECB’s monetary policy measures on bank lending. The ECB’s asset purchase programme (APP), the pandemic emergency purchase programme (PEPP) and the third series of targeted longer-term refinancing operations (TLTRO III) all had a positive impact on banks’ liquidity positions and market financing conditions. These measures, as well as the ECB’s negative deposit facility rate, had an easing impact on bank lending conditions and a positive impact on lending volumes, mainly for loans to firms. TLTRO III in particular has strongly supported bank lending over the past six months.

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 April 2021 survey relate to changes observed in the first quarter of 2021 and expected changes in the second quarter of 2021, unless otherwise indicated. The April 2021 survey round was conducted between 11 and 26 March 2021. A total of 143 banks were surveyed in this round, with a response rate of 100%.

Source: European Central Bank Press Release