A net 7% of euro area banks tightened lending standards for corporate loans in the second quarter of 2026, down from 10% in the first quarter and below the 19% tightening they had expected. Demand for business loans rose slightly, with a net 3% of banks reporting an increase, against expectations of a 10% drop.
The result points to a moderate tightening, and CME Group analysis said it indicates banks remain risk-averse, particularly in sectors vulnerable to energy shocks and geopolitical tensions, such as automotive manufacturing. Corporate credit demand strengthened modestly, driven by working capital needs, inventory financing, investment by large firms and debt refinancing.
HOUSING LOANS TIGHTEN AS MORTGAGE DEMAND FALLS
Credit standards for housing loans tightened by a net 9% of banks, broadly in line with expectations of 8%. Overall lending terms and conditions tightened by a net 4%, the first tightening since the third quarter of 2023.
Household demand was weaker. Demand for housing loans fell sharply, by 15%, as weaker consumer confidence, higher borrowing costs and softer housing market prospects constrained mortgage activity.
EARLIER QUARTERS SET THE COMPARISON
The January 2026 bank lending survey showed euro area banks reporting an unexpected net tightening of credit standards for loans or credit lines to enterprises in the fourth quarter of 2025, at a net 7%. Banks also reported a continued small net increase in demand from firms, at 3%.
In the first quarter of 2026, banks reported a further net tightening of credit standards for loans or credit lines to firms, at 10%. They also reported a slight net decrease in loan demand from firms, at -2%, in contrast to the expectations of increased demand in the previous survey.
FIRMS REPORT HIGHER FEES AND GUARANTEE DEMANDS
In the ECB's business credit survey, a net 27% of firms said they had encountered a tightening of other financing costs, such as fees. Some 14% faced tighter guarantee requirements.
The main findings were influenced by a substantial change in the composition of the sample firms. The ECB's Survey on the Access to Finance of Enterprises for the second quarter of 2026 covered 5,087 euro area enterprises, of which 4,679, or 92%, had fewer than 250 employees.
BANKS EXPECT TIGHTENING TO CONTINUE AT A SLOWER PACE
For the third quarter of 2026, banks expect credit standards to continue to tighten, albeit at a more moderate pace of 5%. They expect a moderate net increase in loan demand of 4%.
The outcome of US-Iran negotiations continues to be a source of uncertainty, with banks revising their assessments as talks evolve. The ECB recently left its benchmark interest rate unchanged at 2.25%, citing concerns over how volatile energy prices could affect inflation. As of September 2025, exposures of ECB-supervised banks to the Middle East amounted to less than 1% of their total assets of €27.8 trillion.
Related: ECB set to hold deposit rate at 2.5% as slowdown delays next hike to December