The European Central Bank's latest bank lending survey for the third quarter of 2026 reveals a continued tightening of credit standards for loans to firms, with a net percentage of 9%. This marks a slight increase from the second quarter's 7% and exceeds banks' own expectations of 5%. The tightening is primarily driven by heightened risk perceptions and lower risk tolerance, with geopolitical uncertainty and energy developments also playing a role. Across major euro area countries, France and Germany reported tighter credit standards, while Italy saw easing and Spain remained unchanged.
For housing loans, credit standards remained broadly unchanged, while consumer credit saw a net tightening of 14%. Banks expect further tightening in the fourth quarter, with housing loans anticipated to tighten by 10% and consumer credit by 16%, the highest since the third quarter of 2023. Loan demand for firms decreased by a net 6%, contrasting with expectations of an increase. High interest rates, weaker demand for fixed investment among SMEs, and uncertainty about geopolitical and energy developments contributed to this decline.
Demand for housing loans saw a strong net decrease of 27%, the most pronounced since the third quarter of 2023, driven by interest rate developments and diminishing consumer confidence. Consumer credit demand declined slightly by 2%. Banks expect these trends to continue, with further declines in demand for both housing loans (-36%) and consumer credit (-14%) in the fourth quarter. Overall, credit terms and conditions tightened across all loan segments, primarily due to higher interest rates and wider margins on riskier loans.
The survey also highlighted that euro area banks' access to retail funding, debt securities, and money markets deteriorated further, while remaining unchanged for securitisations. The reduction in the ECB's monetary policy asset portfolio had a mildly negative impact on banks' market financing conditions and liquidity positions over the last 12 months. Additionally, digital assets made a small positive contribution to banks' business strategies over the past year.