FRANKFURT (MNI) – Eurozone banks see a very slight net tightening
of credit standards in all loan categories in this quarter, the European
Central Bank’s quarterly Bank Lending Survey showed Thursday.

At the same time the banks expect to see positive developments with
respect to demand for all loan types, the survey said.

Looking back to 4Q, credit standards to businesses remained broadly
unchanged while they tightened slightly for household consumption loans
due to banks’ more cautious assessment of individuals’ risk profiles,
the ECB said. Credit standards on home mortgage loans tightened
considerably, the survey showed.

With regard to business loans, “the main driver of the decline in
the net tightening of credit standards in comparison with the previous
quarter was a decrease in the impact of banks’ risk perceptions,” the
ECB explained.

“In the last quarter of 2010, credit standards on loans to small
and medium-sized enterprise (SMEs) were tightened further, albeit only
slightly, while those on loans to larger firms remained stable,” the ECB
said.

“Moreover, slightly looser credit standards applied predominantly
to short-term loans, while credit standards on long-term loans remained
unchanged,” the ECB added.

“In the last quarter of 2010, the credit standards applied to
households tended to tighten slightly further,” the bank said.

“Credit standards on loans for house purchase appear to be tied
closely to country-specific developments in housing markets,” it added.

“In the last quarter of the 2010, the net percentage of banks
reporting a further tightening of standards for this category of loans
bounced back to 11%, mainly driven by increased risk perceptions,” the
bank said, which translated into an increase in margins on riskier
loans.

“Looking forward, euro area banks expect a very slight further
tightening, in net terms, of credit standards for all categories of
loans in the first quarter of 2011,” the bank said.

Turning to the demand side, in 4Q “euro area banks reported that,
in net terms, demand for corporate loans and households’ demand for
mortgage loans continued to increase.”

At the same time, “demand for consumer credit contracted, albeit at
a slower pace than in the previous survey round.

–Frankfurt bureau, +49-69-720142, tbuell@marketnews.com

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