9 April 2024

• Credit standards were broadly unchanged in the first quarter of 2024
• Loan demand from firms declined substantially, contrary to bank expectations of a recovery
• Ongoing central bank balance sheet reduction continued to exert tightening pressure
• The positive impact of policy rate decisions on bank profits is expected to diminish over the next six months

According to the April 2024 euro area bank lending survey (BLS), euro area banks reported a small net tightening of their credit standards – i.e. banks’ internal guidelines or loan approval criteria – for loans or credit lines to enterprises in the first quarter of 2024 (net percentage of banks of 3%; Chart 1), which was less than banks had expected in the previous round (9%). Banks, for the first time since the fourth quarter of 2021, reported a moderate net easing of their credit standards for loans to households for house purchase (net percentage of -6%), whereas credit standards for consumer credit and other lending…