Euro area banks loosen credit standards for first time since 2007

The European Central Bank said euro area banks loosened credit standards for loans to consumers for the first time since the end of 2007, in a sign that the region's sovereign debt crisis may be abating.

A measure of consumer credit standards climbed to a net easing last quarter from a net tightening in the three months ended March, the Frankfurt-based ECB said in its quarterly Bank Lending Survey today.

Banks tightened credit standards less for home loans and at the same rate for companies as in the previous quarter. ECB president Mario Draghi pledged last month to keep interest rates low for an extended period of time amid low inflation, a subdued economic outlook and "weaker and weaker" credit flows.

Lending to companies and households in the euro area has contracted for more than a year as the longest-ever recession in the 17-nation region weighs on bank balance sheets and investment demand.

“The development of credit standards for both non- financial corporations and households in the second quarter of 2013 reflected somewhat reduced contributions not only from banks’ risk perceptions, but also from their cost of funds and balance sheet constraints,” the ECB said in the report. “This notwithstanding, borrowers’ risk and macroeconomic uncertainty remained the main factors that curbed lending policies.”

Separately, a lending survey from the Irish Central Bank indicated consumers here found it easier to get mortgages in the second quarter of 2013.

The bank’s quarterly bank lending survey, which examines credit market conditions for households and businesses, also found demand for mortgage loans increased for a fifth consecutive quarter.

The survey said the increase in mortgage demand coincided with more favourable housing market prospects and increased levels of consumer confidence in the domestic economy.

For the fifth successive quarter, credit standards were unchanged on loans to enterprises, the survey found.

Loan demand from enterprises was unchanged during the second quarter, following the increase in previous quarter.