Italian banks maintain firm credit standards, tighten consumer loans
Italian banks kept credit standards for firms and mortgages unchanged in the fourth quarter of 2025, while tightening them for consumer credit. Loan demand from both firms and households increased, driven by lower interest rates and investment needs.
Credit standards diverge by borrower
In the fourth quarter of 2025, credit standards for loans to firms remained unchanged, with terms and conditions easing slightly due to lower interest rates.
Standards for household mortgage loans also held steady, but were tightened slightly for consumer credit.
For the first quarter of 2026, standards are expected to remain unchanged for firms and mortgages, with further tightening anticipated for consumer credit.
Firms' demand for loans edged up, primarily driven by higher borrowing needs for debt refinancing, fixed investment, and mergers and acquisitions.
Demand for household loans increased, benefiting from reduced interest rates, greater household confidence for mortgages, and higher spending on durable goods for consumer credit.
Both firm and household loan demand are projected to pick up further in the current quarter.
Funding improves amid regulatory shifts
Italian banks saw overall funding conditions improve in Q4 2025, especially for medium-to-long-term debt securities, with this trend expected to continue into Q1 2026. Regulatory and supervisory measures from 2025 are set to impact 2026, forecasting increased risk-weighted assets, higher capital issuance, and tighter credit standards for household loans.
The rise in non-performing loans in Q4 2025 also contributed to stricter consumer loan standards, a trend anticipated to persist.
Specific tightening occurred for energy-intensive manufacturers in the automotive sector and non-residential real estate firms in H2 2025, with further tightening expected for energy-intensive manufacturing in H1 2026.
Targeted caution prevails
The survey reveals a nuanced stability in Italian bank lending, with overall credit standards holding steady but targeted caution evident in riskier segments.
This adaptive response balances improving funding conditions with evolving regulatory and asset quality concerns.
The selective tightening, despite rising demand, underscores a strategic focus on risk management.
Source: Comments to main results - January 2026
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