Eurozone Banks Tighten Credit Standards in Q1, ECB Says

Eurozone banks tightened credit standards across all loan categories in the first quarter of the year, the sharpest move since the third quarter of 2023, as economic risks and geopolitical tensions mounted, according to the European Central Bank's latest Bank Lending Survey.

The survey, covering the 21 euro-using countries and released Tuesday, showed the overall tightening exceeded expectations and the historical average. Banks cited perceived risks to the economic outlook and reduced risk tolerance as primary drivers. Geopolitical developments, including the conflict in Iran that began in late February and related Middle East exposures, along with surging energy prices, added further pressure. Some banks also tightened standards due to direct links to energy-intensive firms.

Corporate lending saw the most pronounced restrictions, marking the strongest tightening in over two years. Standards for consumer credit and other household loans hardened significantly, while mortgage conditions eased only slightly. Looking ahead, banks anticipate a widespread and more marked net tightening in the second quarter, fueled by persistent geopolitical strains, energy market volatility and...