July 2026 euro area bank lending survey shows moderate tightening of credit standards

The July 2026 bank lending survey (BLS) indicates that euro area banks reported a moderate net tightening of credit standards for loans and credit lines to enterprises in the second quarter of 2026, with a net 7% of banks tightening standards.

Credit standards also tightened for loans to households for house purchase and consumer credit, with net 9% and 12% of banks tightening respectively. The overall tightening was driven mainly by perceived risks to the economic outlook and banks’ lower risk tolerance, especially regarding geopolitical and energy developments.

Banks expect further tightening of credit standards across all loan categories in the third quarter of 2026. Terms and conditions for loans, including interest rates, also tightened for all segments.

There was a net increase in rejected loan applications across all borrower groups, with the highest increase in consumer credit applications.

Loan demand to firms increased slightly (net 3%), supported by higher demand for inventories, working capital, and investment. Conversely, demand for housing loans declined markedly (net -15%), mainly due to deteriorating consumer confidence and interest rate changes. Demand for consumer credit and other household loans softened slightly (net -2%).

Access to retail funding, debt securities, and money markets deteriorated slightly but remained broadly unchanged for securitisations. Banks expect further deterioration in access over the next three months.

Credit standards for loans to firms and consumer credit were affected by higher non-performing loan ratios and credit quality concerns, with expectations of further tightening in the third quarter of 2026.

Most economic sectors experienced tightening of credit standards in the first half of 2026, especially energy-related manufacturing sectors like the car industry. Further tightening is expected across most sectors in the second half of 2026, with unchanged standards for non-financial services and residential real estate.

Firms engaged in green transition or with credible climate plans experienced easing of credit standards and increased demand, while high-emission firms faced tightening. Climate-related risks, especially physical risks, continue to influence lending conditions for real estate and corporate loans.

The survey was conducted between 15 and 30 June 2026 with 159 banks participating, providing insights into bank lending behavior in the euro area. The results relate to changes observed in Q2 2026 and expectations for Q3 2026.