ECB survey: euro area banks tighten credit to firms as loan demand falls
Banks in the October 2026 bank lending survey reported tighter standards for business and consumer loans and lower demand in every segment, mainly because of higher interest rates.
AI illustrationEuro area banks tightened credit standards for loans to firms again in the third quarter of 2026, while demand for loans fell across all segments, according to the European Central Bank's October 2026 bank lending survey.
A net 9% of banks reported tighter standards for loans or credit lines to enterprises, more than the 5% they had expected in the previous round. Standards for housing loans were unchanged at a net 0%, while a net 14% tightened standards for consumer credit and other lending to households. Banks named heightened risk perceptions and lower risk tolerance as the main reasons, and some pointed to geopolitical uncertainty and energy developments. The share of rejected loan applications rose in net terms for all borrower groups, most of all for consumer credit.
Demand weakened as well. Banks reported a net decrease of -6% in demand from firms, against an expected increase of 4% and after a small net rise of 3% in the second quarter. The general level of interest rates was the main drag. Demand for housing loans fell by a net -27%, a sharper drop than the -15% in the second quarter and the -12% banks had expected. Demand for consumer credit slipped slightly, by a net -2%.
For the fourth quarter of 2026, banks expect standards to tighten further for firms and to tighten significantly for housing loans and consumer credit. They expect demand for housing loans to fall by -36% and for consumer credit by -14%, while demand from firms is expected to stay broadly unchanged at -1%.
On artificial intelligence, several banks said they expect a gradual but sustained increase in demand for loans to finance digital infrastructure, particularly data centres. Most banks have not yet added specific quantitative criteria for AI-related lending to their credit standards, and their AI-related lending is more likely to go to infrastructure providers than to software developers or AI adopters.
Banks also reported that their access to retail funding, debt securities and money markets decreased further. The deterioration in access to retail funding, while still moderate, was the largest since the series began in 2011. The survey of 159 banks was conducted between 21 September and 6 October 2026, with a response rate of 100%.