Euro zone banks see moderation in loan demand, tighter standards: ECB

FRANKFURT (Reuters) - Euro zone banks expect to tighten credit standards for business and housing loans in the first quarter and experience a moderation in loan demand, the European Central Bank said on Tuesday in a quarterly survey of the bloc's top banks.

Buying 2.6 trillion euros ($3 trillion) of public and private bonds over the past four years, the ECB has pushed borrowing costs to record low, hoping to stimulate borrowing and spending, all with the ultimate aim of boosting inflation.

But its stimulus scheme is now winding down, raising concerns that borrowing costs could rise just as the euro zone economy is going through its biggest growth slump in years.

"Net demand for loans continued to increase (in the fourth quarter), but banks expect some moderation in demand over the next three months," the ECB said in a survey of 147 lenders.

In the last quarter of 2018, credit standards -- banks' internal guidelines or loan approval criteria -- were broadly stable for mortgage and corporate lending but tightened for consumer credit, the ECB added.

Competitive pressures contributed to an easing of credit standards for loans to enterprises and housing loans, while lower risk perceptions contributed to an easing of credit in mortgage lending, the ECB said.

But banks' risk tolerance contributed to a tightening of standards in the case of business loans and the cost of funding had a broadly neutral impact.

"Given the extended period over which credit standards have been easing, bank lending conditions continue to support loan growth," the ECB added. "These developments follow a considerable overall net easing of credit standards since 2014."

For the first quarter of 2019, "banks expect a slight tightening of credit standards for loans to enterprises and housing loans and broadly unchanged credit standards for consumer credit and other lending to households."