ANKARA

An urgent credit demand of companies in the Eurozone increased in the first quarter of the year as economic activities narrowed “sharply and suddenly” due to the coronavirus outbreak across Europe, according to a European Central Bank’s (ECB) survey published on Tuesday.

The euro area bank lending survey showed loan demand of companies was significantly higher for short-term loans than for long-term loans, in line with firms’ ongoing payment needs.

The firms’ financing needs for fixed investment and for mergers and acquisitions declined in net terms, the survey indicated.

Banks projected that net demand for loans to firms will rise further in the second quarter of 2020.

“A strongly negative net balance for demand for housing loans and consumer credit is expected by banks in the second quarter of 2020, ” it said.

The survey also showed there are tighter credit standards for loans to enterprises and households for house purchase and consumer credit and other lending to households in the first quarter of 2020.

“For loans to households, the net tightening was somewhat stronger than for firms (a net percentage of 9% for loans to households for house purchase and of 10% for consumer credit and other lending to households),” it noted.

According to the survey, for the second quarter of 2020, banks expect credit standards to ease considerably for firms, probably on account of the support measures introduced by governments.

“By contrast, the net tightening of credit standards on loans to households is expected to continue in the second quarter of 2020,” it stressed.

The survey conducted four times a year was developed by the Eurosystem in order to improve its understanding of banks’ lending behavior in the euro area.

The April 2020 survey round was conducted between March 19 and April 3. A total of 144 banks were surveyed in this round, with a response rate of 99%.

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