European Central Bank: Sharp decrease in loan demand

ECB announced the results of the Bank Lending Survey for July 2023.

Accordingly, the conditions in the loan approval processes of banks in the Eurozone for companies were tightened in the second quarter of this year.

While the economic outlook was the main reason for the high risk perception, the conditions in banks' lending processes are expected to be tightened in the third quarter of this year.

While there was a sharp decrease in the loan demand of firms in the region, increasing interest rates stood out as the main factor behind the decreasing loan demand.

In addition to increasing interest rates, there was a net decrease in the demand for consumer loans and other loans to households due to low consumer confidence, and this decrease is expected to continue, especially in housing loans.

Eurozone banks' concern over non-performing loans also increased, while banks' risk perception towards loans increased and their risk tolerance decreased.