Euro area firms report tighter lending conditions in Q4 2025

Euro area firms experienced a significant tightening of bank lending conditions in the fourth quarter of 2025. A net 12 percent of firms reported increased interest rates on bank loans, a notable rise from 2 percent in the previous quarter, affecting both small and medium-sized enterprises (SMEs) and large firms similarly.

Beyond interest rates, a net 28 percent of firms saw increases in other financing costs, such as charges, fees, and commissions, while 14 percent reported higher collateral requirements.

This tightening environment coincided with a modest rise in firms' demand for bank loans (net 3 percent increase in needs) and a slight decline in perceived availability (net 2 percent decrease).

This combination led to a widening of the bank loan financing gap, an index reflecting the difference between need and availability, which rose to a net 3 percent from 1 percent in the preceding quarter.

Firms anticipate external financing availability to remain largely unchanged over the next three months.

Firms' inflation expectations remained broadly stable across all horizons, with median expectations for annual inflation one year ahead at 2.6 percent, and 3.0 percent for both the three and five-year horizons.

A net 56 percent of firms continued to perceive upside risks to the long-term inflation outlook.

The survey also explored artificial intelligence (AI) adoption among euro area firms.

Results show 27 percent of firms do not use AI, 33 percent use it very infrequently, 31 percent moderately, and 7 percent significantly.

SMEs are less likely to use AI than large firms (35% vs. 13% not using), though the share of firms making significant use of AI is similar across both size categories.