Banks in the euro area have recorded an increase in demand for emergency credit from corporate clients during the first quarter. This according to a survey of bank lending released by the European Central Bank today. The Bank says that there is likely to be another rise due to the continued effects of the coronavirus pandemic on the economy.
The European Central Bank added that credit standards, or criteria for approving internal loans to banks, had been tightened, but described this as "minor" compared to the global financial crisis and subsequent euro-zone debt crisis.
The European Central Bank added that company demands for loans or withdrawing of credit lines increased in the first quarter of 2020 due to their emergency liquidity needs. In the second quarter, the demand for corporate loans is expected to increase further to the highest net balance since the survey began in 2003.
However, given that the survey of 144 banks was taken at the peak of the coronavirus induced closures in Europe between March 19 and April, the European Central Bank said it was likely that credit standards for corporate borrowers would improve significantly in the second quarter. This with the help of liquidity procedures and government guarantees from the European Central Bank.
The European Central Bank added that credit standards for households were tightened more than corporate customers, and that additional tightening is likely in the second quarter.
