Eurozone Banks Maintain Strict Lending Standards Amid Geopolitical Risks

The European Central Bank's latest lending survey found that eurozone banks tightened their lending standards in the second quarter, despite a slight increase in demand for corporate loans.

Banks remained cautious due to geopolitical risks and economic uncertainty, with the pace of tightening moderating compared to the previous quarter. A net 7% of banks tightened lending standards, down from 10% in the first quarter and below the expected 19% tightening.

The European Commission warned that the EU economy remains resilient but faces a more challenging outlook due to trade tensions, higher US tariffs, and persistent geopolitical uncertainty. Domestic demand has been supported by a strong labour market and easing inflation, but policymakers cautioned that weaker global trade, subdued business investment, and external risks are likely to keep the recovery modest.

The survey found that credit standards for corporate lending tightened further in the third quarter of 2026, with banks expecting stricter approval standards. Demand for housing loans fell sharply, while credit standards for consumer credit and other household lending tightened by a net 12%.