Demand for loans in eurozone slowly stabilizing: ECB data


FRANKFURT- A day after the European Central Bank gave most eurozone banks a clean bill of health, new data were published suggesting that depressed demand for loans in the single currency area could be stabilizing.

The ECB compiles monthly statistics on loans to the private sector, which are a key gauge of economic health and particularly closely watched at the moment since chronic weakness in credit is seen as the main hurdle to a more sustained recovery in the single currency area.

The ECB’s lastest data showed that in September, loans to the private sector in the euro area, fell by 1.2 percent year-on-year in September, but that was a slower rate than the 1.5-percent decline seen in August.

At the same time, the ECB calculated that growth of the overall eurozone money supply — a barometer for future inflation — picked up.

The two sets of data provided some room for encouragement, analysts said.

“The ECB may take a little heart from a further limited pick-up in eurozone money supply growth in September, signs that bank lending to businesses is now falling at a reduced rate and another moderate rise in lending to households,” said IHS Global Insight economist Howard Archer.

On Sunday, the results of the ECB’s latest stress tests cleared all but 25 of a total 130 banks as having adequate capital and being soundly based.

The assessment was broadly well received on financial markets on Monday, because it could raise confidence in the banking sector and allow banks, which have been strengthening their financial base to pass the tests, some extra margin for manoeuvre to lend if and when loan demands picks up.

SOURCE: APP/AFP

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