Eurozone banks tighten lending standards further as geopolitical risks weigh on credit conditions

<ul><li>Full report <a href="https://www.ecb.europa.eu/press/pr/date/2026/html/ecb.pr260721~44ee50f75c.en.html" rel="follow">here</a></li></ul><p class="PDq2pG_selectionAnchorContainer">The ECB's Bank Lending Survey showed that euro area banks continued to tighten lending standards in the second quarter, reflecting heightened concerns over the economic outlook, geopolitical tensions and energy-related risks.</p><p>Banks reported a moderate tightening of credit standards for corporate loans (net 7%), as well as for housing loans (9%) and consumer credit (12%). The main drivers were weaker risk tolerance and higher perceived credit risks. Banks expect lending standards to tighten further across all loan categories in the third quarter.</p><p>Banks also tightened overall lending terms and conditions, primarily through higher interest rates, while reporting an increase in the share of rejected loan applications across all borrower groups, particularly for consumer credit.</p><p>On the demand side, corporate loan demand edged higher (net 3%), supported by financing needs for inventories, working capital, debt refinancing and investment by large firms. The increase was stronger than banks had anticipated. By contrast, demand for housing loans fell sharply (net -15%), weighed down by weaker consumer confidence, higher borrowing costs and a softer housing market outlook. Demand for consumer credit also declined slightly (net -2%).</p><p>Bank lending tightening is a drag on euro area's growth outlook amid a hawkish ECB and geopolitical uncertainty. If the situation in the Middle East doesn't improve quickly, growth risks might soon replace inflation worries and weigh on Eurozone assets.</p>

This article was written by Giuseppe Dellamotta at investinglive.com.

This article was sourced from Forexlive. WealthWire aggregates financial news for informational purposes only. This does not constitute investment advice.