German banks tighten lending standards, credit risk rises
German banks tightened lending standards for companies and private households in the second quarter of 2026, according to the latest Bank Lending Survey. Increased credit risk was the primary reason cited for the stricter policies across all lending segments.
Credit risk drives stricter policies
The Bank Lending Survey (BLS) revealed that German banks tightened their lending policies for corporate loans (+10 percent net share), private housing loans (+7 percent), and consumer loans (+11 percent) in Q2 2026.
This tightening in corporate lending was less pronounced than in the previous quarter and below banks' expectations from the April survey.
Banks primarily attributed the stricter policies to increased credit risk across all segments, with corporate lending seeing the strongest tightening for the real estate, manufacturing, and trade sectors.
Climate-related risks also led to stricter policies for high CO2-emitting companies, firms in transition, and loans for low-energy-efficiency buildings.
Lending conditions for corporate and housing loans became more restrictive, driven by higher interest rates and wider margins for riskier credits.
Refinancing conditions for banks slightly worsened, particularly for short-term customer deposits and debt securities.
Non-performing loans (NPLs) did not significantly contribute to the tightening this quarter.
Demand shifts amid climate concerns
Credit demand from companies increased in Q2 2026, continuing a trend from early 2024 and surpassing banks' expectations.
This rise was driven by large companies seeking long-term financing for refinancing, debt restructuring, and capital expenditure.
Conversely, demand from private households for both housing and consumer loans significantly decreased, reaching levels last seen three years ago.
Banks attributed this decline to reduced consumer confidence, higher general interest rates, and a negative outlook on the residential real estate market.
Loan rejection rates rose for corporate and consumer loans.
For Q3 2026, banks expect corporate demand to continue rising, while household demand is projected to fall further.
Climate-related factors stimulated demand for loans to companies in transition and high CO2 emitters, and for high-energy-efficiency buildings, but negatively impacted demand for low-energy-efficiency buildings.