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Eurozone Banks Expect To Tighten Credit Standards In Q4

The euro area banks expect to tighten their credit standards for firms and to households for house purchases in the fourth quarter, according to bank lending survey from the European Central Bank, released Tuesday.

Reflecting concerns around the economic recovery as some sectors remain vulnerable, banks said they are likely to continue tightening credit standards for firms. The net tightening of credit standards on loans to households for house purchases is also expected to continue in the fourth quarter.

Lenders tightened their credit standards for all loan categories, namely loans to enterprises, loans to households for house purchase and consumer credit and other lending to households in the third quarter.

In the third quarter, demand for credit from firms declined on account of lower emergency liquidity needs related to the coronavirus pandemic following a record net increase in demand in the previous quarter.

Meanwhile, demand for housing loans increased in the third quarter, suggesting some catching up in demand after the lockdown period.

In the fourth quarter, demand for loans to firms is expected to rebound. Demand for housing loans is expected to fall, while demand for consumer credit is expected by banks to increase in the fourth quarter.

The survey was conducted among 143 banks between September 21 and October 6.

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