The second quarter results show banks again tightening their credit standards for loans or credit lines to enterprises. Even so, at just 3 percent, the balance was unchanged from the first quarter print and so matched the lowest reading since the first quarter of 2022. For households, standards continued to ease for mortgage lending (minus 6 percent) and similarly matched the rate in the previous period. However, they tightened further for consumer credit (6 percent after 9 percent), albeit less aggressively than at the start of the year. For the current quarter, banks expect a moderate net tightening for loans to firms and unchanged credit standards for loans to households.

The survey also found another decline firms' net demand for loans (minus 7 percent after minus 28 percent) but by the least since the fourth quarter of 2022. Moreover, both the demand for housing loans (16 percent after minus 3 percent) and other consumer credit (13 percent after 1 percent) saw positive growth.

Overall, last quarter's findings suggest that the effects of earlier monetary tightening are fading and the ECB will note the recovery in household loan demand. Today's report is unlikely to have any immediate implications for central bank policy and should not impact a widely held expectation for unchanged key interest rates on Thursday.

The European Central Bank's quarterly lending survey of around one hundred and forty banks aims to enhance the Eurosystem's knowledge of financing conditions in the Eurozone and so help the central bank to assess monetary and economic developments as an input into monetary policy decisions. The headline number refers to the net percentage of banks that have tightened their credit standards on lending to enterprises. It is designed to complement existing statistics on retail bank interest rates and credit with information on supply and demand conditions in the euro area credit markets and the lending policies of euro area banks. The survey addresses issues such as credit standards for approving loans as well as credit terms and conditions applied to enterprises and households. It also asks for an assessment of the conditions affecting credit demand.

Particularly in the wake of the Great Recession and the Covid-19 crisis, changes in financial market conditions can have a major say in central bank policy, and hence, the level of asset prices. The main focus is the net percentage of reporting banks indicating tightening credit standards or positive loan demand with regards to enterprises, house purchase and consumer credit. An unwanted tightening of standards or undesired fall in lending could prompt a softer monetary stance from the ECB, potentially entailing lower official short-term interest rates and possible efforts to reduce the cost of longer-term loans.