FRANKFURT (Reuters) – Euro zone banks anticipate emergency credit score demand to surge once more within the second quarter and they’re prone to meet this with simpler credit score requirements as authorities ensures and liquidity measures kick in, the European Central Financial institution stated on Tuesday.
With a lot of the continent in lockdown to stem the unfold of the coronavirus pandemic, the euro zone economic system might shrink by a tenth this yr and corporations are scrambling for funding to remain afloat till the economic system reopens.
Credit score requirements, or banks’ inside loan approval standards, for company loans tightened within the first quarter however the deterioration was “small” in comparison with the worldwide monetary disaster and the bloc’s subsequent debt disaster, due partly to authorities measures, the ECB added.
The central financial institution’s liquidity measures and authorities ensures will absolutely kick in by the second quarter so banks anticipate their credit score requirements to ease considerably within the three months to June, the ECB added, primarily based on a survey of 144 lenders.
Among the many euro zone’s largest nations, company credit score requirements tightened probably the most in Germany and Italy whereas in France, they had been broadly unchanged.
“Companies’ demand for loans or drawing of credit score traces surged within the first quarter of 2020, on account of corporations’ emergency liquidity wants,” the ECB stated. “Within the second quarter, corporations’ loan demand is predicted to extend additional, to the best web steadiness for the reason that begin of the survey in 2003.”
Family debtors face extra difficultly as credit score requirements tightened within the first quarter and an extra deterioration within the second quarter can also be seemingly, the ECB added in a survey carried out between March 19 and April 3, the peak of Europe’s coronavirus lockdown.
(Reporting by Balazs Koranyi; Enhancing by Francesco Canepa, Kirsten Donovan)