Banks in the euro area tightened lending conditions for businesses over the three months to September, while demand for credit fell, according to the European Central Bank’s (ECB) Bank Lending Survey (BLS). The report, published on Tuesday, the 27th, indicated that the tightening of loan approval criteria was largely driven by increased perceived risk stemming from the war between the United States and Iran.
“The elevated perception of risk and the banks’ lower risk tolerance continued to be the main factors behind the tightening of credit standards; some banks reported growing pressure resulting from geopolitical uncertainty and the evolution of the energy landscape,” the ECB said.
Banks recorded an increase in the share of loan applications that were rejected over the quarter. The survey also pointed to a drop in demand for credit, despite banks’ expectations, mainly due to higher funding costs.
In another report, the ECB said that new loans to businesses rose to 13 billion euros in September, up from 11 billion euros in August.
