Banks ‘tightening up on lending’

Lending standards employed by banks in Europe became tighter towards the end of last year, it has been reported.

A survey by the European Central Bank (ECB) found a “sharp tightening” in the last quarter of 2008, Thomson Financial reports.

Four in ten banks responding to the ECB bank lending survey admitted credit standards in corporate lending had been tightened.

Housebuyers also faced tighter borrowing criteria, as reported by 21 per cent of banks in the survey, while one in ten banks also employed stricter standards when it came to consumer credit and other household loans.

The news comes at a time when debt management is at the forefront of many consumers’ minds, as the reality of overspending during the festive season hits and some struggle to avoid bankruptcy.

Thomson Financial cites the ECB as saying: “The sharp tightening reflects the deterioration of financial market conditions since the start of the financial turmoil last summer and a worsening of banks’ situation.”

Meanwhile, Sir John Gieve, deputy governor of the Bank of England, indicated that access to borrowing might be limited as banks take a stricter approach to approving credit.

Speaking at a London Chamber of Commerce and Industry event, Mr Gieve said: “This tightening of credit conditions would be exacerbated by any further weakening in the financial position of banks due to a slowdown in the wider economy.”

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