Credit crunch not yet over but turning point is closer, says ECB
THERE is no end yet to the credit crunch in the euro area, as banks say they expect to tighten credit rules further in the first half of 2010.
"All in all, a turning-point in the tightening trend observed since the second half of 2007 is now closer, but has not yet been reached," the European Central Bank said in its latest quarterly bank lending survey.
A net 10pc of banks tightened rules on consumer lending in the last three months of 2009, and hopes of an easing in the current three months have faded.
"Banks appear to have re- assessed developments in credit standards on consumer loans and, in contrast with the previous survey round, they no longer expect net tightening to come to a halt," the ECB said.
There is a growing squeeze on mortgage lending. Demand is increasing, but banks are not loosening their requirements on borrowers.
A net 3pc of banks tightened standards for mortgage borrowers in the fourth quarter and a net 2pc intend to do so in the first three months of 2010. At the same time, a net 16pc of banks reported increased demand for mortgages and a net 22pc expect higher demand in the first quarter.
The squeeze is a bit less severe for companies, not yet showing immediate improvement. A net 4pc of banks said they saw themselves tightening credit standards to firms in the first quarter, compared with 3pc in Q4 of 2009.
Other ECB data showed lending to companies contracted at a sharper pace last month, according to figures from the European Central Bank.
Company borrowings fell by €27bn during December, a drop of 2.3pc on the previous month. It left corporate credit down almost 6pc in the final quarter of last year.
Loans for house purchases jumped 1.5pc, after showing no growth over the previous two months. Consumer credit fell for the fourth month in a row, although by only 0.1pc.