The banks In the euro area, credit standards for companies tightened to maximum since 2023, according to the European Central Bank – abolishing hopes of rapid recovery of corporate lending that could support investment.

The trend that appeared in the fourth quarter “was mainly due to the banks of Germany and France due to the environment of increased policy of uncertainty, while credit standards retreated to Italy,” the ECB Tuesday in the quarterly research on bank lending.

At the same time, research has shown that business loan demand has increased slightly again, although it remained patient, the ECB said.

Borrowing data is essential for the ECB in order to evaluate how far it will reduce borrowing costs. A fifth decline in deposit rate is widely expected this week amid concerns about the economy and expectations that inflation will firmly return to the 2% target this year.

The data this week is expected to show that growth in the eurozone block slowed to just 0.1% in the fourth quarter – from 0.4% in the third, as reported by Bloomberg.

In an interview with the end of last year, Isabel Schnabel executive member said that the lending investigation showed that the restrictive impact of the ECB’s interest rates on inflation is impossible to weaken, warning not to be in a hurry.

For the first quarter of 2025, banks provide further tightening credit criteria for business loans, while expecting that demand will remain unchanged in general.

What does Bloomberg say

“The research has revealed that borrowing conditions are stabilized after they have improved significantly in the last two years. This will probably cause most members of the Board of Directors to argue that a neutral policy is suitable for the economy, although their views on exactly where it is, may differ. However, most of them seem to agree that another cut by 25 basis points in January. “