Key facts
- Euro zone corporate lending grew at its fastest pace in three years in May.
- The annual growth rate of loans to non-financial corporations reached 4% in May.
- Lending to households increased to 3.1% in May.
- The broad M3 monetary aggregate grew to 3.2% in May.
- Banks reported a net tightening of credit standards for loans to firms and households.
- Banks anticipate further tightening of credit standards and a decrease in loan demand in the second quarter.
Bank lending to companies in the euro zone expanded at its quickest rate in three years during May, according to data released by the European Central Bank. The annual growth rate for loans to non-financial corporations rose to 4% in May, up from 3.4% in April. Lending to households also saw a modest increase, growing by 3.1% compared to 3.0% in the previous month. The broader M3 monetary aggregate expanded to 3.2% from 2.7% in April.
Concurrently, the ECB's bank lending survey indicated that banks reported a net tightening of credit standards for both firms and households. This tightening was attributed to perceived risks and a reduced tolerance for risk. Banks anticipate continuing this trend in the second quarter, citing geopolitical tensions, energy market developments, and higher funding costs as contributing factors.
Furthermore, banks expect a decrease in loan demand from both corporations and households in the upcoming quarter, driven by reduced financing for fixed investments, lower consumer confidence, and decreased spending on durable goods. The survey also highlighted a deterioration in banks' access to funding through debt securities, money markets, and securitisations, with expectations of further weakening in the next quarter.