Euro area banks tightened the rules they use to approve loans in early 2026 and said they expect credit to become harder to obtain in the months ahead, according to the European Central Bank.
Banks reported a “net tightening” of credit standards — their internal loan approval criteria — across all loan categories in the first quarter of 2026, with the biggest shift in consumer lending, new figures from the ECB’s April 2026 bank lending survey showed.
Credit standards for loans or credit lines to businesses tightened by a net 10% of banks, while standards for consumer credit and other household lending tightened by a net 15%, the ECB informed on Tuesday.
Standards for mortgages tightened slightly, with a net 2% of banks reporting tougher criteria.
Banks said higher perceived risks to the economic outlook and lower risk tolerance drove the tightening, with some pointing to geopolitical and energy developments as additional factors.
Some banks also cited exposures to energy-intensive firms and to the Middle East.
Banks also reported a net increase in the share of rejected loan applications for all borrower groups, with a larger increase for consumer credit than for business and housing loans.
Demand for loans falls, with more declines expected
Demand for business loans fell slightly in the first quarter, with a net balance of -2% of banks reporting lower demand, after banks had expected an increase in the previous survey round, the ECB said.
Banks attributed the fall mainly to reduced financing for fixed investment, partly offset by higher demand for inventories and working capital, particularly among small and medium-sized enterprises.
Demand for mortgages was unchanged, with a net balance of 0%, and banks cited weaker consumer confidence and interest rate developments as factors weighing on demand.
Demand for consumer credit and other household lending fell more sharply, with a net balance of -11%, which banks linked to weaker spending on durable goods — such as cars and household appliances — and lower consumer confidence, as well as the general level of interest rates.
Looking ahead to the second quarter of 2026, banks expect a more marked tightening of credit standards for business loans and mortgages, alongside further tightening for consumer credit, according to the survey. Banks also expect demand to decline further for mortgages (net -20%) and consumer credit (net -9%).
Nearly half of euro area banks reported using securitisation — packaging loans into securities that can be sold to investors — to support new lending, manage credit risk and strengthen liquidity and funding. Private investment funds and insurers and pension funds were the most significant buyers of securitised loans, followed by supranational institutions and other banks.
