The results reported in the July 2022 bank lending survey (BLS) relate to changes observed during the second quarter of 2022 and expectations for the third quarter of 2022. The survey was conducted between 10 and 28 June 2022. A total of 153 banks were surveyed in this round, with a response rate of 100%. In addition to results for the euro area as a whole, this report also contains results for the four largest euro area countries.
A number of ad hoc questions were included in the July 2022 survey. They address the impact of the situation in financial markets on banks’ access to retail and wholesale funding, the impact of banks’ non-performing loan (NPL) ratios on their lending policies, and the change in bank lending conditions and loan demand across the main economic sectors.
In the July 2022 BLS, euro area banks indicated a considerable further tightening of their credit standards for loans to firms in the second quarter of 2022, i.e. the percentage share of banks reporting a tightening of credit standards was considerably larger than the share of banks reporting an easing. Banks reported that risk perceptions related to the economic outlook, industry or firm-specific situation and banks’ decreased risk tolerance had a strong tightening impact on credit standards. Banks’ cost of funds and balance sheet constraints had a tightening impact on credit standards for loans to firms, as monetary policy is becoming less accommodative. In the third quarter of 2022, euro area banks expect a net tightening of credit standards for loans to firms of a similar magnitude to the second quarter.
Firms’ net demand for loans continued to increase in the second quarter of 2022, in line with expectations in the previous quarter. Loan demand continued to be driven by firms’ financing needs for working capital, likely related to increased production input prices in the context of continuing supply chain disruptions and high energy prices. At the same time, fixed investment had a dampening impact on firms’ net demand for loans, suggesting that they are postponing their investment in the current uncertain environment. In addition, the positive contribution of the general level of interest rates to loan demand was more moderate than in the previous quarter. In the third quarter of 2022, banks expect a moderate net decline in demand for loans to firms.
Banks reported a strong net tightening of credit standards for housing loans and a moderate net tightening for consumer credit in the second quarter of 2022. The net tightening of credit standards for housing loans was considerably stronger than in the previous quarter and above the historical average. For housing loans, higher risk perceptions, lower risk tolerance and a moderate tightening impact from banks’ cost of funds and balance sheet constraints contributed to the net tightening. Higher risk…