The ECB’s latest bank lending survey confirms a significant tightening of credit conditions but forward-looking components are marginally less grim, probably reflecting the ECB’s three-year lending operation.
The net percentage of banks tightening credit standards on business loans rose to 35% last quarter, the highest since 2009 and similar to the level in early 2008 before a collapse in industrial output – see chart. This confirms a message of weakness from last week’s monetary data – see previous post.
The balance planning to tighten standards in the current quarter, however, was lower, at 25%, reflecting an expectation of less difficult wholesale funding conditions following the ECB’s decision to extend the maturity of its liquidity support and loosen collateral requirements further. Banks, presumably, will have been encouraged by a thawing of markets since the survey was conducted in late December / early January, with the key three-month LIBOR / OIS spread subsiding from more than 90 to below 70 basis points.
