Euro Zone Banks to Make Loans Even Harder to Come By

Mon, 11 Aug 2008

Borrowers are going to find it even harder to secure a loan after it was announced that Euro zone banks are once again set to tighten lending conditions. A survey by the European Central Bank revealed that 44 per cent of banks made it harder to secure loans in the second quarter of 2008, and although that figure is down from the 51 per cent discovered in the first quarter, it remains the case that banks are tightening credit standards.

The European Central Bank cited ‘a deterioration in expectations about the economic outlook’ as the major reason for banks’ continued caution. Of the banks consulted in the survey, nearly 90 per cent declared that they are still finding it hard to securitise assets, whilst just one per cent said that conditions had eased. Meanwhile, 62 per cent of banks reported a fall in demand for home loans during the second quarter, continuing the trend from the first quarter.

The findings of the survey have been revealed in the wake of the ECB’s decision to leave rates unchanged at 4.25 per cent – a figure which represents a seven year high.
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