Arab Today, arab today eurozone bank sector on mend ecb survey shows
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Arab Today, arab today

Eurozone bank sector on mend, ECB survey shows

Arab Today, arab today

Arab Today, arab today Eurozone bank sector on mend, ECB survey shows

Europe's battered financial sector is showing further signs of mending,
Frankfurt - AFP

Europe's battered financial sector is showing further signs of mending and banks are increasingly competing for custom by easing credit standards, a key European Central Bank survey showed on Tuesday.

The ECB said its quarterly bank lending survey (BLS) showed banks are easing credit standards for loans to enterprises, an encouraging sign, since the chronic weakness of credit activity in the euro area has previously been blamed for the absence of any noticeable recovery in the 19 countries that share the single currency.

"In response to the January 2016 bank lending survey (BLS), euro-area banks reported a continued net easing of credit standards on loans to enterprises in the fourth quarter of 2015," the ECB report said.

It conceded that the easing was "slightly less pronounced than banks' expectations in the previous survey round."

But "competitive pressures were the main factor behind this easing," it added.

Banks reported a net easing of credit standards on loans to households for house purchase, again due to competitive pressures, it said.

Demand for loans is also increasing, the ECB found.

"Net demand across all loan categories continued to rise, especially for loans to enterprises," the survey showed.

"The low general level of interest rates contributed most to the increase in loan demand. For loans to enterprises, financing needs for working capital and fixed investment were further contributors to stronger demand. For housing loans, consumer confidence and housing market prospects additionally underpinned loan demand."

The eurozone central bank has previously complained that its ultra-easy monetary policy had not been feeding through into the real economy, because banks are not passing the money on in loans, particularly to the small and mid-sized enterprises (SMEs) which are the region's economic backbone.

In an attempt to address this, the ECB embarked on a controversial programme of sovereign bond purchases, known as quantitative easing or QE.

- 'Encouraging news' -

UniCredit analyst Loredana Federico said the increase in net demand for loans "was driven not only by the low cost of borrowing but also by increasing financing needs of firms related to fixed investment. This ... encouraging news is expected to underpin the recovery of corporate lending going forward and bodes well for an acceleration in fixed investment this year."

Natixis economist Johannes Gareis also saw the survey's findings as "positive news."

"Amid the current financial market rout and fears over a slowdown of growth in the global economy, the results of the survey ... are encouraging," he said.

The findings "bolster other ECB reports that show that the recovery in eurozone bank lending is continuing," Gareis said.

"This is important because the lack of lending has been one of the most pressing problems for the eurozone economy. With falling interest rates and credit standards on loans to enterprises, conditions are more and more in place for a strengthening recovery of business investment and thus growth," he concluded.

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