Banks made it significantly easier for businesses and households to receive loans in the early months of this year in a sign that bank lending practices have improved, the European Central Bank (ECB)said yesterday.

"The results indicate a consolidation of past improvements in lending policies by banks located in the euro area," the ECB said in releasing its quarterly bank lending survey.

The April report, which covers the first quarter of 2005 compared with the fourth quarter of last year, provides ballast to ECB policymakers' argument that the central bank's official interest rate of 2 per cent is no hindrance to economic activity.

The standards businesses had to meet to qualify for a loan or line of credit were 10 per cent easier in the January-to-March period compared with the final months of 2004, the survey found.

This was the fourth consecutive quarter that the ECB survey found a net easing of credit standards.

The relaxation of standard was markedly higher than the 2 per cent loosening that was seen in the January report, it said.

Strong competition among banks for loan business was the primary reason cited for the looser qualifications applied to businesses seeking a loan, the ECB said.

Additionally, the number of banks that said current economic conditions were risky for granting business loans and consequently had tightened lending standards was far lower - 2 per cent in the first quarter compared with 11 per cent in the fourth quarter of 2004, the ECB said.

As for household lending, banks reported a slight net easing of standards for obtaining a home mortgage.

Qualifications were loosened by about 7 per cent in the first quarter, compared with 1 per cent of banks in the fourth quarter.

At the same time, net demand for housing loans decreased for the first time, by 1 per cent compared with a 9 per cent increase in demand in the fourth quarter.

"The main factors that affected the net decrease in demand for housing loans were a more negative contribution of consumer confidence and higher non-housing related consumption expenditures," the ECB said.