Credit demand rises in Q3

Demand for bank credit among Irish firms grew for the seventh consecutive quarterly period during the third quarter of this year, according to the latest euro area bank lending survey conducted by the European Central Bank (ECB).

In its summary of the Irish banks’ responses to the survey, the Central Bank here said yesterday that while there was a further increase in loan demand, the level of demand was at a lower rate than seen during late 2014/early 2015.

“Loan demand increased from SMEs and for both short and long-term loans, while loan demand from large enterprises remained unchanged,” it added.

Among Irish firms, there was an increase in demand for fixed investment, which corresponds with demand for long-term loans.

“The other main driver of loan demand was for accumulation of working capital,” the Central Bank added.

The wider picture from the ECB report shows that credit standards for eurozone companies eased more than expected in the third quarter as banks awash with central bank money competed for customers.

Banks said they were using additional liquidity from the ECB’s €60bn a month asset-purchase programme (APP) to grant loans, providing some comfort to the ECB as it looks for evidence that its quantitative easing scheme is working its way into the economy.

A net 4% of respondents in the ECB’s Bank Lending Survey said they were easing credit standards on loans to enterprises, more than they forecast three months earlier, and expected to continue to do so in the last quarter of the year.

“The APP had a net easing impact on credit standards and particularly on credit terms and conditions,” the ECB said in its quarterly survey of 141 of the eurozone’s largest banks.

“This easing impact was greatest for loans to enterprises.”

Standards eased mainly on loans to SMEs, which form the backbone of the eurozone economy.

Among the bloc’s largest countries, lending standards became easier in Italy, remained unchanged in Germany, Spain and the Netherlands, and tightened in France.

Companies’ demand for loans also rose, albeit by less than expected, and a “further considerable increase” was expected in the last quarter of the year.

Standards on consumer credit eased while those on household mortgages tightened slightly, particularly in the Netherlands, where regulation changed.