April 2026 euro area bank lending survey reports tightening credit standards and declining loan demand

The April 2026 euro area bank lending survey indicates that banks reported a larger than expected net tightening of credit standards for loans to enterprises in the first quarter of 2026, with a net 10% of banks tightening standards. Credit standards for household loans to buy houses saw a small net tightening (2%), while standards for consumer credit and other household lending tightened more significantly (15%).

For firms, the net tightening was above the historical average and the most pronounced since Q3 2023, driven mainly by perceived risks and lower risk tolerance, with geopolitical and energy developments exerting additional pressure. Some banks reported additional tightening due to exposures to energy-intensive firms and the Middle East.

Credit standards for housing loans slightly tightened, influenced by risk perceptions, while competition had a small easing effect. Overall, banks expect further tightening of credit standards in the second quarter of 2026 for loans to firms, house purchase loans, and consumer credit.

Terms and conditions for loans to firms and consumer credit tightened, while those for housing loans remained unchanged. The share of rejected loan applications increased across all borrower groups, especially for consumer credit.

Loan demand decreased slightly in the first quarter of 2026, with a net percentage of -2%, driven mainly by reduced demand for fixed investments, while demand for inventories and working capital increased among SMEs. Demand for housing loans remained unchanged, but demand for consumer credit and other household loans declined sharply (-11%). Banks expect further declines in demand for housing loans (-20%) and consumer credit (-9%) in the next quarter.

Access to debt securities, money markets, and securitisation markets deteriorated in Q1 2026, with expectations of further deterioration over the next three months. Credit quality concerns, including higher NPL ratios, contributed to the tightening of credit standards for loans to firms and consumer credit.

Banks reported a neutral impact of ECB interest rate decisions on net interest income over the past six months, with expectations of a positive impact on profitability in the upcoming quarters. Nearly half of banks reported using securitisation activities, mainly synthetic SRT, to free up capital, improve liquidity, and manage credit risks. Securitisation supported loan volumes, especially for firms, and is expected to have an increasingly positive impact on lending in the coming year.

The survey was conducted between 19 March and 7 April 2026, with 161 banks participating, achieving a response rate of 100%. The results provide insights into bank lending behavior amid ongoing geopolitical and economic uncertainties.