25 July 2023

• Credit standards tightened further for all loan categories
• Demand for loans decreased strongly for both firms and households
• Banks more concerned about non-performing loans, set to tighten lending conditions
• Climate risks increasingly reflected in lending conditions

According to the July 2023 euro area bank lending survey (BLS), credit standards – i.e. banks’ internal guidelines or loan approval criteria – for loans or credit lines to enterprises tightened further in the second quarter of 2023. The net percentage of banks reporting a tightening was smaller than in the previous quarter, standing at 14%, compared with 27% in the first quarter (Chart 1), in line with what banks had expected. The cumulated net tightening since the beginning of 2022 has been substantial, and the BLS results have provided early indications about the significant weakening in lending dynamics observed since last autumn. Banks also reported a further net tightening of their credit standards…