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Demand for loans 'may be sign economy levelling out'

THE lending criteria for businesses and demand for loans increased during the third quarter of the year, in a sign that the economy may be bottoming out.

In its responses to a European Central Bank (ECB) survey on bank lending, the Central Bank here said that while business lending conditions were little changed during the three months to the end of September, credit standards for mortgages and other forms of consumer credit actually tightened during the quarter.

Overall, the ECB report found that banks across the continent made it harder for firms to borrow in the third quarter and expected to toughen loan requirements further, even though their own funding constraints had eased.

The ECB said that while banks saw lower demand and tighter standards, they also reported an improvement in access to retail and wholesale funding across all categories in the third quarter.

"Banks reported an improvement in their access to retail and wholesale funding across all funding categories," the ECB said.

"For the fourth quarter of 2012, banks expect funding conditions to keep improving."

On the demand side, "euro-area banks continued to report a pronounced net decline in the demand for loans to enterprises in the third quarter of 2012.

"Mergers and acquisitions and inventories and working capital were the main drivers of the more pronounced net decline in demand for loans to enterprises," the ECB added.

The report was published on the same day it emerged that eurozone unemployment hit a record 11.6pc during September, indicating the crisis was far from resolved. There are now 18.5 million people in eurozone countries without work.

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