Overview
- The ECB's quarterly Bank Lending Survey found banks raised credit standards in the second quarter because they see higher risk from geopolitical instability and energy-price swings.
- Banks surveyed reported tougher loan terms mainly through higher interest rates and a rise in rejected applications across borrower types, with consumer credit showing the largest increase in rejections.
- Demand for business loans rose while housing loan demand fell sharply and is expected to drop further, and credit was tightened most for carmakers and energy‑intensive manufacturers.
- Banks told the ECB they expect lending standards to tighten across all loan categories in the third quarter, which could lower investment and slow the housing market.
- Policymakers will use the survey in decisions about interest rates since the Iran-related energy shock has lifted inflation toward 3 percent and raised the trade-off between growth and price stability.