Irish lending levels lower than in euro zone, says ECB

THE WIDENING gap between Irish and euro zone economic trends was indicated in ECB data published yesterday. The ECB’s latest bank lending survey showed that while the appetite for credit increased in the euro zone in the last quarter of 2010, demand for credit from Irish banks was little changed.

The survey showed that on average, in the last quarter of 2010, demand for loans picked up across the euro zone, indicating an improvement in consumer demand for credit as the euro zone economy began to recover.

However, data relating to Irish banks, which was released separately by the Irish Central Bank, showed that demand for credit from Irish businesses was little changed in the quarter, with a slight decrease in the demand for long-term loans from businesses. Demand from households for mortgage loans fell during the quarter. This reflected the less favourable housing market, reduced levels of consumer confidence and increased household savings, according to the respondents to the survey, the Central Bank said. Similarly, demand for other types of consumer lending was unchanged in the quarter, which was attributed to increased levels of household savings. Five Irish banks participate in the quarterly euro-wide survey which gives an insight into credit market conditions.

Both the Irish and euro zone surveys showed that credit restrictions continued to be tight in the last quarter of 2010, though the Central Bank said there was no indication that credit standards had become more onerous since October.

However, the euro zone survey said banks expected to impose slightly stricter lending rules on firms, consumers and house buyers in the first quarter of the year overall.

“Euro area banks expect a very slight further tightening, in net terms, of credit standards for all categories of loans in the first quarter of 2011,” the ECB survey said.

While the Irish survey found that credit standards are forecast to remain unchanged on loans to businesses during the first quarter of 2011, credit standards are expected to tighten in respect of loans to households for house purchases, the survey found.

The survey also found that Irish banks found it increasingly difficult to access the wholesale funding market across the maturity spectrum during the final quarter of 2010, with a further deterioration forecast for the first quarter of 2011.