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FRANKFURT : Financial market turbulence has led to a tightening of eurozone credit standards, particularly for loans to big companies, the European Central Bank said on Friday.
"Banks reported that credit standards for loans to enterprises were more affected by the turmoil than credit standards for loans to households," the ECB said in a quarterly survey of bank lending.
"In particular, the situation in financial markets had a larger impact on loans to large enterprises than on loans to small and medium-size enterprises," the central bank said.
ECB President Jean-Claude Trichet had said in Athens on Thursday that the survey showed a net 49-percent of banks had tightened standards on loans to companies in the first quarter of 2008, while a net 33 percent of banks tightened credit standards on loans for house purchases.
"We see a continued increase in the net tightening of credit standards on loans," Trichet said.
The ECB said a net 54 percent of banks said the financial market situation had prompted them to tighten credit standards for loans and credit lines to large companies, compared with a net 34 percent in the case of loans to smaller companies.
Tighter conditions on home loans were reported by a net 29 percent of banks surveyed, and by 19 percent for consumer credit and other loans to households.
The impact of turmoil on credit standards was especially strong on loans to companies that wanted to finance mergers and acquisitions and corporate restructuring, whereas the effect was more limited on loans to finance fixed investment of inventories and working capital.
Banks said market turmoil had made it more difficult to access wholesale funding, curbing the amount they were willing to lend in turn, and the margins at which funds were being lent, the survey found.
But banks also reported that demand for loans from companies and households had declined in the first three months of 2008.
They expected credit conditions on loans to companies and households to tighten further in the second quarter, but by a smaller margin, the ECB said.
The survey is conducted four times a year and includes a set of questions aimed at gauging the extent to which financial market tensions that surged in mid 2007 have affected lending in the 15-nation eurozone.
Friday's results included banks from Cyprus and Malta for the first time.
- AFP /ls
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