— Banks Still See Deterioration In Money Market Access Beyond 1 Week

FRANKFURT (MNI) – Eurozone banks euro area banks expect a further
moderate tightening of credit standards for both non-financial
corporations and households in the second quarter of the year,
continuing the trend of the first quarter, the European Central Bank’s
Bank Lending Survey showed Wednesday.

Banks attributed the tightening of credit standards mainly to
credit supply-side considerations related to access to market financing
and their liquidity positions, the ECB said. In lending to households,
“the general perception of risks” also played a role, it said.

In terms of demand, “euro area banks reported a notable increase in
the demand for loans to NFCs (to 19% in net terms in the first quarter
of 2011, from 10% in the fourth quarter of 2010), mainly driven by a
pick-up in financing needs for fixed investment and inventories/working
capital,” the report said.

By contrast, demand from households declined in the first quarter
of 2011, due to lower consumer confidence and a deterioration of housing
market prospects. Looking ahead, however, banks said that the prospects
for loan demand remain “broadly positive,” the report said.

The ad hoc question — aimed at assessing the extent to which the
situation in the financial markets affected banks’ credit standards —
showed that “despite a mild improvement in accessing very short-term
money markets, euro area banks still reported a deterioration in access
to money markets for maturities above one week.”

Euro area banks continued to see an overall deterioration in their
ability to access debt securities markets, although the deterioration
was significantly less pronounced than in the previous quarter (for
medium to long-term securities), the results of the survey showed.

“Looking forward, euro area banks expect access to money markets to
ease and possibly start to improve overall in the second quarter of the
year,” the ECB said.

“By contrast, access to debt securities markets could remain
somewhat problematic, albeit less than in the first quarter. Conditions
for the securitisation of corporate loans are also expected to continue
to deteriorate in the second quarter of the year,” the survey found.

The results were recorded between and March 14 and March 31, with
124 Eurozone banks participating, the ECB said.

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