Euro area banks tighten credit, loan demand falls in Q1 2026

Euro area banks reported a net tightening of credit standards for loans to enterprises (net 10% of banks) in the first quarter of 2026, a larger increase than previously expected and the most pronounced since Q3 2023.

Credit standards for consumer credit tightened more markedly (net 15%), while those for housing loans saw a small net tightening (net 2%).

The primary drivers were higher perceived risks to the economic outlook and banks' lower risk tolerance, with geopolitical and energy developments also exerting pressure.

Some banks specifically cited exposures to energy-intensive firms and the Middle East.

Banks also reported a net increase in rejected loan applications across all borrower groups, with consumer credit seeing the highest share.

Looking ahead to the second quarter of 2026, banks anticipate a widespread and more marked net tightening of credit standards for both firms and households, including for house purchase and consumer credit.

Loan demand from firms saw a slight net decrease (net -2%) in Q1 2026, mainly due to reduced fixed investments, despite some offset from inventories.

Housing loan demand was unchanged (net 0%), weaker than anticipated, influenced by deteriorating consumer confidence and interest rates.

Consumer credit demand declined strongly (net -11%), reflecting weaker spending on durables and lower confidence.

Banks expect further declines in demand for all loan categories in Q2 2026.

Access to debt securities, money markets, and securitisations deteriorated in Q1 2026, the most significant decline since Q1 2023, with further deterioration expected.

Nearly half of euro area banks use securitisation, primarily to free up capital, manage credit risks, and improve liquidity.