The euro area bank lending survey - Fourth quarter of 2025

1 Overview of results

In the bank lending survey (BLS) on the fourth quarter of 2025, euro area banks reported an unexpected net tightening of credit standards for loans or credit lines to firms (net percentage of banks of 7%; see Overview table).^[1] Perceived risks to the economic outlook as well as the lower risk tolerance displayed by banks drove this development, signalling a high degree of risk aversion on the part of banks. Across the largest euro area countries, banks in Germany and France reported tighter credit standards for firms, partly but not exclusively related to firms affected by changes in trade policies, while credit standards remained unchanged in Spain and Italy. For the first quarter of 2026, banks expect a further net tightening of credit standards for loans to firms (6%).

Banks reported a small net easing of credit standards for housing loans, whereas credit standards for consumer credit tightened further (net percentages of -2% and 6% respectively). For housing loans, competition had an easing impact on credit standards while risk perceptions had a tightening impact. Banks' lower risk tolerance and higher risk perceptions were the main drivers of the tightening for consumer credit. Across the largest euro area countries, credit standards for housing loans remained unchanged in Spain and Italy, tightened in Germany and eased in France. The easing of credit standards for housing loans was unexpected, whereas banks had expected a tightening for consumer credit. For the first quarter of 2026, banks expect credit standards to tighten for housing loans (3%) and, more markedly, for consumer credit (9%).

Firms' demand for loans continued to increase slightly, in net terms, in the fourth quarter of 2025, with heterogeneity across countries, banks and firm sizes (net percentage of 3%). The net increase in loan demand was similar to that for the third quarter (2%). It was mainly driven by an increase in demand for inventories and working capital, debt refinancing/restructuring and mergers and acquisitions (within "other financing needs"), whereas fixed investment made an overall neutral net contribution to loan demand. The general level of interest rates continued to provide slight support to the increase in loan demand, although less than in previous quarters, with the supportive impact concentrated in Italy. Across the largest euro area countries, demand for loans to firms increased in Germany and Italy and decreased in Spain and France. The increase in loan demand was unexpected. For the first quarter of 2026, banks expect a further net increase in loan demand (6%).

Banks reported an additional, albeit more moderate, net increase in demand for housing loans, whereas demand for consumer credit decreased slightly (net percentages of 9% and -2% respectively). Improved housing market prospects were the main driver of the increase in demand for housing loans, while consumer confidence contributed negatively. Developments in interest rates contributed only very slightly to the net increase in demand and were offset by a negative contribution from other financing needs. The net increase in demand was lower than in the previous quarter (28%) but broadly in line with banks' expectations (8%). Consumer credit demand declined as consumer confidence weakened, despite the positive contribution from the general level of interest rates. The decrease in demand for consumer credit contrasts with previous expectations of a minor increase (2%). For the first quarter of 2026, banks expect a small increase in demand for both housing loans (3%) and consumer credit (2%).

Overall credit terms and conditions tightened for loans to firms and consumer credit, while they eased for housing loans. For firms, it was the first net tightening since the fourth quarter of 2023, driven by lending rates, collateral requirements and other terms and conditions, while margins on average loans continued to narrow. For housing loans, developments in lending rates provided a strong tightening contribution while margins on average loans narrowed. For consumer credit, the tightening was driven by higher rates, higher margins on riskier loans and idiosyncratic factors, while margins on average loans had an easing impact.

Banks reported a net increase in the share of rejected loan applications for large firms, small and medium-sized enterprises (SME) and consumer credit, and an unchanged share for housing loans. The net increase in the share was higher than in the previous quarter for large firms and lower for SMEs, housing loans and consumer credit.

This BLS round contained the following ad hoc questions:

• Euro area banks' access to retail funding and money markets deteriorated slightly in the fourth quarter of 2025, while it eased for debt securities and securitisations. The deterioration in access to retail funding was due to long-term retail funding, while the improvement in funding through debt securities was driven by medium to long-term securities. Over the next three months, banks expect access to retail and money market funding and to securitisation markets to remain broadly unchanged and to ease slightly for debt securities funding.
• In response to new regulatory or supervisory actions, euro area banks reported a net increase in their capital and holdings of liquid assets, while indicating a temporary decline in risk-weighted assets. Banks also indicated a net tightening impact on credit standards stemming from such actions across all loan categories, with further net tightening expected for 2026.
• Euro area banks reported a small net tightening impact of non-performing loan (NPL) ratios and other credit quality indicators on their credit standards for all loan categories in the fourth quarter of 2025, with risk perceptions and risk aversion being the most prominent factors. In the first quarter of 2026, euro area banks expect a further small tightening impact for loans to firms and for consumer credit, while they expect a broadly neutral impact for housing loans.
• Credit standards tightened in construction, wholesale and retail trade, energy-intensive manufacturing and commercial real estate (CRE) in the second half of 2025, with the net tightening being strongest in the manufacturing of motor vehicles. It remained moderate in the overall manufacturing sector, while non-financial services other than CRE saw no or only small net tightening. Banks also reported a net increase in demand for loans in non-financial services other than CRE and no change or only slight declines in other sectors in the second half of 2025. For the first half of 2026, euro area banks expect either a further net tightening or broadly unchanged credit standards across the main economic sectors. Banks expect a net increase in loan demand for most sectors, the only exceptions being the manufacturing of motor vehicles, wholesale and retail trade, and CRE.
• Based on a new question on the impact of changes in trade policies and related uncertainty, almost half of the BLS banks assessed their exposure as "important". Banks reported a tightening impact on credit standards, mostly through a decrease in risk tolerance, and a dampening impact on demand for loans to firms. Banks expect a similar impact for 2026.

2 Loans to enterprises

2.1 Net tightening of credit standards

Euro area banks reported an unexpected net tightening of credit standards for loans or credit lines to firms in the fourth quarter of 2025 (net percentage of banks of 7%; see Chart 1 and Overview table).^[3] This followed the lower net tightening of credit standards for loans to firms in the third quarter of 2025 (4%), surpassing the expectations reported by banks in that quarter (1%). The cumulated net tightening was 19% since the third quarter of 2024 (i.e. since the start of the latest monetary policy easing cycle).^[4] Across the largest euro area countries, banks in Germany and France reported tighter credit standards for loans to firms, while credit standards remained unchanged in Spain and Italy. The net tightening for euro area firms was around the historical average since 2003 (8%) but above the historical average since 2014 (3%).^[5] It was higher for loans to large firms than for loans to SMEs (net percentages of 6% and 2% respectively; see Chart 2). Across maturities, banks reported a net tightening of credit standards for both short-term and long-term loans (net percentage of 7% for both).

Concerns about the outlook for firms and the broader economy, as well as banks' lower risk tolerance, led to tighter credit standards (see Chart 1 and Table 1). The net tightening signalled a high degree of risk aversion and a prudent approach to lending by banks. As part of their perceived risks, banks referred to a tightening impact of both the industry-specific and the firm-specific situation (10%) and the general economic outlook (7%). This is also consistent with the net tightening impact of banks' NPL ratios and other indicators of asset quality on credit standards via perceived risks for banks (see Section 5.3). In addition, higher perceived risks and the lower risk tolerance reported by banks are influenced in part by the impact of changes in trade policies and related uncertainty (see Section 5.5). Banks' balance sheet situations and competition had a broadly neutral impact on credit standards in the fourth quarter of 2025. Across the largest euro area countries, banks in Germany and France reported higher perceived risks and a lower risk tolerance as the main drivers of the net tightening. Banks in Spain and Italy mentioned no notable impact from any particular factor.

In the first quarter of 2026, euro area banks expect a moderate further net tightening of credit standards for loans to firms (net percentage of 6%). Banks expect that the net tightening of credit standards for loans to large firms will remain stronger than for loans to SMEs (7% and 2% respectively) and that credit standards will tighten more for long-term loans (7%) than for short-term loans (3%). In line with the developments seen in the fourth quarter, banks in Germany and France expect a net tightening while banks in Spain and Italy anticipate unchanged credit standards for firms in the first quarter of 2026.

2.2 Terms and conditions tightened

Overall terms and conditions for new loans to enterprises tightened for the first time since the fourth quarter of 2023 (net percentage of 4%; see Chart 3 and Table 2).^[6] Banks referred to a net tightening impact from lending rates, consistent with the uptick in euro area risk-free rates towards the end of 2025, as well as stricter collateral requirements and other terms and conditions, such as loan size, maturity and loan covenants, in the fourth quarter of 2025. Margins on average loans continued to have a small easing impact for loans to firms, while margins on riskier loans had a broadly neutral impact on terms and conditions. Across the four largest euro area countries, banks in Germany, Spain and France reported a net tightening of overall terms and conditions, driven by lending rates (in Germany and Spain), loan margins (in Germany), and collateral requirements and other terms and conditions (in France). Banks in Italy indicated a net easing of overall terms and conditions related to lower lending rates. Across firm sizes, euro area banks reported a net tightening of overall terms and conditions for loans both to SMEs and to large firms (5% and 3% respectively; see Chart 4). The tightening impact of lending rates was concentrated on loans to SMEs. This might indicate, together with wider margins on riskier loans to SMEs, that banks have added an additional charge for higher credit risk. For loans to SMEs, the tightening was also due to stricter collateral requirements and other terms and conditions. For loans to large firms, banks referred to broadly unchanged lending rates, and a tightening impact via stricter collateral requirements and other terms and conditions, whereas margins on average loans continued to narrow and margins on riskier loans remained unchanged.

Higher risk perceptions and lower risk tolerance were the primary drivers behind the overall tightening of terms and conditions for euro area firms (see Table 3). Competition had a small easing effect, mainly among banks in France.

2.3 Rejection rates increased further

Banks reported a further net increase in the share of rejected loan applications for firms (net percentage of 6%, see Chart 5). The net increase was similar to the previous quarter (5%), and higher for large firms than for SMEs (6% and 2% respectively). This follows previous quarters in which the net increase in the share of loan rejections was higher for loans to SMEs than for large firms. The higher net increase in the share of loan rejections for large firms is consistent with the stronger net tightening of credit standards for loans to large firms than for loans to SMEs in the fourth quarter.

Banks in Germany and France reported a net increase in the share of rejected corporate loan applications in the fourth quarter of 2025. For Germany, the net increase was similar for loans to SMEs and large firms, whereas in France banks reported a net increase in the share of rejected loan applications for large firms but not for SMEs. Banks in Spain and Italy indicated unchanged rejection rates for loans to firms.

2.4 Demand for loans increased slightly

Firms' demand for loans continued to increase slightly, in net terms, in the fourth quarter of 2025, with heterogeneity across countries, banks and firm sizes (net percentage of 3%; see Chart 6).^[7] The net increase in loan demand was similar to the third quarter (2%) and exceeded the expectations reported by banks in that quarter (0%). Additionally, responses across banks showed some variation, with some banks noting an increase in loan demand while others observed a decrease. Across the largest euro area countries, banks reported a net increase in demand for loans to firms in Germany and Italy, whereas they reported a net decrease in Spain and France. Across firm sizes, demand for loans increased moderately for large firms but decreased slightly for SMEs (7% and -2% respectively, see Chart 7). SMEs may have been more hesitant to seek loans due to less favourable financing conditions compared with larger firms (see Section 2.2). Loan demand increased moderately for long-term loans and only slightly for short-term loans (8% and 2% respectively), although in both cases more than in the previous quarter.

Firms' loan demand was primarily driven by an increase in demand for inventories and working capital and other financing needs, whereas fixed investment continued to make an overall neutral net contribution (see Chart 6 and Table 4). The increase in demand for inventories and working capital was the highest since the fourth quarter of 2022 and was concentrated in Germany and Italy. Additionally, debt refinancing/restructuring and mergers and acquisitions (within "other financing needs") contributed positively to loan demand (mostly in the case of banks in France and Italy), while firms' internal funds had a small dampening impact. The level of interest rates provided slight support to the increase in loan demand, although less than in previous quarters, with the supportive impact concentrated in Italy. This corresponds to the broad stabilisation of firms' cost of bank borrowing, according to bank interest rate statistics, following declines observed until August 2025. Fixed investment continued to make an overall neutral net contribution to loan demand, dampened by the overall economic situation, while positive effects from infrastructure and defence spending were not yet visible. Across firm sizes, only large firms reported a net increase in financing needs for fixed investment, for the first time since the first quarter of 2022, whereas fixed investment continued to contribute negatively to SMEs' loan demand (see Chart 7). Banks in Germany and Italy indicated a positive contribution from fixed investment, in combination with an increase in demand for long-term loans, while banks in France and Spain reported a negative impact from fixed investment.

For the first quarter of 2026, banks expect firms' loan demand to increase further (net percentage of 6%). They expect a moderate net increase in demand for loans to large firms and a lower net increase in demand for loans to SMEs (8% and 4% respectively), while they expect a moderate net increase in demand for long-term loans and a small increase in demand for short-term loans to euro area firms (6% and 3% respectively).

3 Loans to households for house purchase

3.1 Small easing of credit standards

Banks reported a small net easing of credit standards for housing loans in the fourth quarter of 2025 (net percentage of banks of -2%, see Chart 8 and Overview table).^[8] The small easing of credit standards for housing loans was unexpected, as banks had anticipated a slight net tightening (2%). Among the four largest euro area countries, credit standards tightened in Germany, eased in France, and remained unchanged in Spain and Italy.

Competition had an easing impact on credit standards, while risk perceptions had a tightening impact (see Chart 8 and Table 5). Risk perceptions were one of the main factors behind the tightening of credit standards in Germany, reflecting banks' views on the general economic situation and borrowers' creditworthiness. Banks in Germany also reported a decline in risk tolerance as a major tightening factor. By contrast, banks in France indicated an increase in risk tolerance, coupled with an easing effect from competitive pressures from other banks.

In the first quarter of 2026, euro area banks expect to slightly tighten credit standards on housing loans (net percentage of 3%). Across the four largest euro area economies, the expected tightening is driven by banks in Germany and Spain, while banks in France anticipate a net easing, and banks in Italy expect unchanged credit standards.

3.2 Moderate net easing of terms and conditions

Euro area banks reported a moderate net easing of overall credit terms and conditions for housing loans in the fourth quarter of 2025 (net percentage of -4%; see Chart 9 and Table 6). This followed a similar easing of terms and conditions reported in the third quarter.^[9] Narrower margins on average loans contributed to this easing, while developments in lending rates made a strong contribution to tightening for the first time since the start of data collection for this factor in the first quarter of 2024. This is consistent with the steepening of the euro area risk-free yield curve over the last quarter, which has translated into upward pressures on mortgage rates. Among the largest euro area countries, banks in Germany reported a net easing of terms and conditions, driven by narrower margins on both average and riskier loans. Banks in France also reported a net easing, with narrower margins on average loans, although lending rates had a tightening impact. In Italy, terms and conditions remained unchanged despite an easing impact from margins on average loans. In Spain, terms and conditions tightened owing to higher margins on average loans and higher lending rates.

In the fourth quarter of 2025, competition had a net easing impact on terms and conditions, while risk perceptions had a net tightening effect and other factors had a broadly neutral impact (see Table 7). The net easing impact of competition was stronger than in the previous quarter and was reported by banks in Germany, France and Italy, whereas in Spain competition had a neutral impact. Banks' costs of funds and balance sheet constraints, mainly related to capital costs, had a net tightening impact in France, while they had a neutral effect on terms and conditions in the other large euro area economies. Banks' risk perceptions had a tightening impact in Germany and Spain, while banks' risk tolerance had a tightening impact only in Germany.

3.3 Rejection rates for housing loans remained unchanged

The share of rejected housing loan applications remained unchanged in the fourth quarter of 2025 (net percentage of 0%; see Chart 10). This result follows the increasing share recorded in the preceding quarter. Across the four largest euro area countries, the share of rejections increased in Spain, decreased in Italy, and remained unchanged in Germany and France.

3.4 Moderate increase in loan demand

Banks reported an additional, albeit more moderate, net increase in demand for housing loans in the fourth quarter of 2025 (net percentage of 9%, see Chart 11 and Overview table).^[10] The net increase was lower than in the previous quarter (28%) and broadly in line with banks' expectations (8%). A net increase in demand was reported in the four largest euro area economies. This seventh consecutive quarter of net increases in housing loan demand is consistent with the gradual rise in volumes of loans to households for house purchase.

Improved housing market prospects were the main driver of the increase in housing loan demand, while consumer confidence contributed negatively (see Chart 11 and Table 8). Developments in interest rates contributed only very slightly to the net increase in demand. Banks reported a markedly lower positive impact of interest rates than the figure for the previous quarter and the average since the first quarter of 2024, but this was offset by a negative contribution from other financing needs. Housing market prospects had a positive impact on demand across the largest euro area economies. Consumer confidence supported demand in Italy and Spain, while it had a dampening effect in Germany and France. Demand in Spain and Italy was also supported by the general level of interest rates, whereas this factor was neutral in Germany and France. Banks in the latter two countries reported a net negative impact of other financing needs on demand. The impact of other financing needs was neutral in Spain and Italy. Finally, the use of alternative finance, related to internal finance from savings and to loans from other banks, contributed to the increase in housing loan demand in Italy, while it had no impact in the other large countries.

In the first quarter of 2026, banks expect housing loan demand to grow further, albeit only slightly (net percentage of 3%). Banks in Germany and Italy expect a net increase in loan demand, banks in Spain anticipate no change, while banks in France foresee a decline.

4 Consumer credit and other lending to households

4.1 Moderate tightening of credit standards

Banks reported a moderate net tightening of credit standards on consumer credit and other lending to households in the fourth quarter of 2025 (net percentage of 6%; see Chart 12 and Overview table).^[11] Credit standards on consumer credit tightened further and at a similar pace to the previous quarter (5%). The net tightening was slightly above euro area banks' expectations in the previous quarter (4%). It was also in line with perceived risks to credit quality for consumer credit, which had a net tightening impact (see Section 5.3). Credit standards tightened across all the larger euro area economies, with the current tightening exceeding historical averages in Germany, France and Italy. In Spain and France, the tightening followed a quarter in which credit standards were unchanged, while in Germany and Italy credit standards had already tightened in that quarter.

The main drivers of the net tightening of credit standards for consumer credit were banks' lower risk tolerance and a deterioration in banks' risk perceptions (see Chart 12 and Table 9). Higher risk perceptions were driven by concerns about both borrowers' creditworthiness (6%) and the general economic outlook (4%). Competition and banks' cost of funds and balance sheet constraints had a broadly neutral impact. In Germany and France, banks' lower risk tolerance and higher perceived risks contributed to the tightening. In Italy, risk perceptions were mentioned as a driver of the tightening, while in Spain the net tightening was driven by banks' lower risk tolerance.

In the first quarter of 2026, euro area banks expect credit standards for consumer credit and other lending to households to tighten more markedly (net percentage of 9%). Across the four largest euro area economies, banks in Germany, France and Italy expect a further net tightening, while banks in Spain expect unchanged credit standards.

4.2 Terms and conditions tightened somewhat

Banks' overall terms and conditions applied when granting consumer credit and other lending to households tightened somewhat in the fourth quarter of 2025 (net percentage of 4%; see Chart 13 and Table 10). This followed a small net easing of terms and conditions in the previous quarter.^[12] Margins on average loans had a net easing impact, but this was offset by higher margins on riskier loans, higher lending rates (consistent with the uptick in the short and long-term risk-free rates in the euro area over the last quarter) and idiosyncratic factors. The pattern of lower margins for average loans and higher margins for riskier loans suggests that banks are discriminating more by borrower risk profile and is also consistent with increased risk aversion on the part of banks. Across the four largest euro area economies, overall terms and conditions tightened in France and Italy, while they remained unchanged in Spain and Germany. In France, margins on average loans had an easing impact, but margins on riskier loans and lending rates had a tightening impact. In Italy, margins on both average and riskier loans, as well as lending rates, contributed to the tightening. In Germany and Spain, margins on riskier loans had a net tightening impact.

Banks' higher risk perceptions and lower risk tolerance contributed to the tightening of overall terms and conditions, while competition had an easing impact (see Table 11). Competition had an easing impact in all large euro area countries except Italy, where it had a tightening impact. Cost of funds and balance sheet constraints, mainly related to market financing, had a small easing effect in Italy. Banks in Spain and France reported lower risk tolerance, while among the largest euro area economies risk perceptions increased in France.

4.3 Rejection rates increased again

Euro area banks reported an increase in the net share of rejected loan applications for consumer credit (net percentage of 8%; see Chart 10). The reported increase was lower than that reported in the previous quarter although it was higher than the historical average (4%). Banks in Germany and France reported an increase in the share of rejections, while banks in Spain and Italy reported a net decrease.

4.4 Demand for consumer credit decreased slightly

Banks reported slightly lower demand, in net terms, for consumer credit and other lending to households (net percentage of -2%; see Chart 14 and Overview table).^[13] This followed broadly unchanged demand in the previous quarter and was somewhat lower than banks' expectations for that quarter (2%). Demand declined in France, remained unchanged in Germany and Spain and increased in Italy.

Lower consumer confidence was the main driver of the small decline in demand, while the general level of interest rates made a positive contribution (see Chart 14 and Table 12). Consumer confidence dampened consumer credit demand in Germany and France, while it had a neutral impact in Spain and a positive impact in Italy. The general level of interest rates supported demand in France and Italy, whereas it had a neutral impact in Germany and Spain. Spending on durable goods had a negative impact in France, a neutral impact in Spain and a positive impact in Germany and Italy. The use of alternative finance - mainly internal finance from savings - was also a factor supporting loan demand in Italy.

For the first quarter of 2026, banks expect a small increase in loan demand for consumer credit and other lending to households (net percentage of 2%). Demand for consumer credit is expected to increase in Italy, to decrease in Germany, and to remain unchanged in Spain and France.

5 Ad hoc questions

5.1 Banks' access to funding deteriorated slightly for retail funding and money markets and improved for debt securities and securitisations

Euro area banks' access to retail funding and money markets deteriorated slightly in the fourth quarter of 2025, while it eased for debt securities and securitisations (Chart 15 and Table 13).^[14] Access to short-term retail funding remained unchanged, whereas access to long-term retail funding became slightly more difficult. This is broadly in line with the stability of overnight deposit rates in the euro area, while term deposit rates increased marginally in the last quarter, according to bank interest rate statistics. Banks reported a slight deterioration in access to money market funding. Access to debt securities funding eased, with the improvement concentrated in medium to long-term securities. Finally, banks reported a slight improvement in access to the securitisation market.

In the first quarter of 2026, banks expect access to retail and money market funding and to securitisation markets to remain broadly unchanged, and to ease slightly for debt securities funding. Euro area banks anticipate slightly better access to short-term retail funding and a small deterioration in access to long-term retail funding. For debt securities, banks expect moderately better access to medium to long-term instruments and broadly unchanged access to short-term securities.

5.2 Banks increased their capital and liquidity while reducing their risk-weighted assets and tightening their credit standards in response to regulatory and supervisory actions

In response to new regulatory and supervisory actions, euro area banks reported a net increase in their capital and in their holdings of liquid assets, while indicating a decline in risk-weighted assets (see Chart 16 and Table 14).^[15] Higher capital levels were supported by both retained earnings and the issuance of new capital. The net increase in capital is qualitatively consistent, among other factors, with the 2024 Supervisory Review and Evaluation Process (SREP), which entailed slightly higher Pillar 2 requirements for CET1 capital for 2025. It is also in line with the increase of macroprudential buffers announced by some national authorities during 2025. Additionally, supervisors have made efforts to enhance banks' resilience to geopolitical shocks, for example by asking them to implement currency-specific liquidity buffers.^[16] Amid heightened uncertainty and increased credit risks, these developments have contributed to banks adopting a more cautious approach to managing their portfolios, focusing on increasing their holdings of liquid assets while reducing their exposure to risk-weighted assets. Within the latter, banks reported lower exposures to average loans, while exposures to riskier loans remained broadly unchanged. This could be the result of borrowers previously considered as safer migrating into higher-risk categories despite banks' low risk tolerance. Additionally, the transition to the new Capital Requirements Regulation (CRR III) may have played a role in the reduction in risk-weighted assets, among other things. Despite the reduction in risk-weighted assets, banks noted an increase in their total assets as liquid assets increased as a result of regulatory and supervisory actions. Finally, banks indicated that these measures had a broadly neutral effect on their funding conditions.

Supervisory or regulatory actions were reported to have a net tightening impact on banks' credit standards across all loan categories in 2025 (see Chart 17 and Table 15). The additional tightening impact was lower than in 2024 for loans to SMEs, loans to large firms and consumer credit, while it was similar for housing loans.

Looking ahead to 2026, euro area banks expect that regulatory and supervisory actions will result in higher capital, higher risk-weighted assets and higher liquid assets, and they also anticipate further net tightening of credit standards. The expected net increase in capital in 2026 is slightly higher than it was in 2025. This may reflect the impact of the ongoing implementation of the output floor and related reforms in the context of the new Capital Requirements Regulation (CRR3), which are expected to gradually raise overall capital needs over time. These initiatives may also explain the anticipated increase in risk-weighted assets, insofar as they could lead to higher effective risk weights by, for example, constraining the use of internal models. This would offset lower non-binding Pillar 2 guidance for 2026, as well as certain supervisory initiatives (e.g. the announced reform of SREP) seeking to simplify current reporting and regulatory requirements. Finally, banks expect to hold higher liquid assets. This might reflect, among other things, liquidity needs related to geopolitical uncertainty and ongoing supervisory scrutiny consistent with supervisory priorities for 2026-28.^[17] Against this backdrop, banks anticipate an additional net tightening of credit standards in 2026.

5.3 Risks to credit quality had a small additional net tightening impact on credit standards

Euro area banks reported a small net tightening impact of NPL ratios and other credit quality indicators on their credit standards for loans to firms, housing loans and consumer credit (net percentages of 3%, 2% and 6% respectively) in the fourth quarter of 2025 (see Chart 18 and Table 16).^[18] The net tightening of credit standards for loans to firms was unchanged on the previous quarter (3%) and was broadly in line with previous expectations. By contrast, for housing loans and consumer credit the net tightening was higher than in the previous quarter, when the impact of credit quality indicators on credit standards had been neutral, and was broadly in line with previous expectations.

Banks indicated that higher risk perceptions, lower risk tolerance and costs related to their capital position contributed to the net tightening of credit standards (see Chart 19 and Table 17). Other factors, such as costs related to balance sheet clean-up, pressure stemming from supervisory or regulatory requirements, access to market financing and the liquidity position of banks, had a broadly neutral impact. This follows the short-lived net easing impact reported for most of these factors in the third quarter, following the tightening impact reported by banks in earlier quarters.

In the first quarter of 2026, euro area banks expect a further small tightening impact of credit quality on their credit standards for loans to firms and for consumer credit. Banks anticipate that various factors, such as the costs related to their capital position, higher pressure from supervisory or regulatory requirements, higher risk perceptions and lower risk tolerance, will have a tightening impact.

5.4 Net tightening of credit standards in several economic sectors

Credit standards tightened in construction, wholesale and retail trade, energy-intensive manufacturing and commercial real estate (CRE) in the second half of 2025, with the net tightening being strongest in the manufacturing of motor vehicles (a new breakdown which was added in this survey round) (see Chart 20 and Table 18).^[19] The net tightening remained moderate in the overall manufacturing sector, while non-financial services other than CRE saw no or only small net tightening. Credit standards tightened only slightly in the services sector (excluding financial services and real estate) and remained unchanged in residential real estate (RRE), following a net easing in the first half of 2025. Changes in credit standards across economic sectors appear broadly consistent with the overall net tightening of credit standards for all firms (see Section 2.1) in 2025.

For the first half of 2026, euro area banks expect either a further net tightening or broadly unchanged credit standards across the main economic sectors. Banks expect only a small net tightening for the manufacturing sector, although tightening could be more pronounced for the energy-intensive and motor vehicle segments. In addition, a moderate net tightening is expected for construction and the wholesale and retail trade sector, and broadly unchanged credit standards are expected for CRE, RRE and other non-financial services.

Banks reported a net increase in demand for loans in RRE and services (excluding financial services and real estate), whereas demand for loans remained broadly unchanged or declined slightly in the other main economic sectors in the second half of 2025 (see Chart 21 and Table 18). The net increase in loan demand in RRE and services in the second half of 2025 followed a smaller net increase and decline, respectively, in the first half of 2025. In addition, net demand for loans remained broadly unchanged in the second half of 2025 in manufacturing, construction, wholesale and retail trade and CRE, after net decreases in the first half of the year. Banks reported a small net decrease in loan demand in energy-intensive manufacturing and the manufacturing of motor vehicles. The changes in demand are, overall, consistent with the small net increase in the demand for loans to all firms (see Section 2.4).

For the first half of 2026, euro area banks expect a net increase in loan demand for most of the main economic sectors, consistent with the expected net increase in demand for loans to all firms. Loan demand is expected to increase in construction, RRE, manufacturing and services, while banks expect loan demand to remain broadly unchanged in CRE and to decrease slightly in wholesale and retail trade. With regard to the breakdowns of the manufacturing sector, banks expect a small net increase in loan demand for energy-intensive manufacturing and a further small decrease in demand for the manufacturing of motor vehicles.

5.5 Changes in trade policies and the related uncertainty led to tighter credit standards and lower demand for loans to firms

In a new ad hoc question, banks reported on the importance of their exposure to changes in trade policies and the related uncertainty, via loans to firms with direct or indirect exposure to trade. They were also asked to report the impact on their own situation and on lending to firms in 2025, as well as their expectations for 2026.^[20]

About half of the euro area banks participating in the survey assessed their exposure to changes in trade policies and related uncertainty in 2025 as "important" (see Chart 22 and Table 19). Most of them assessed their exposure as "somewhat important", but not as "very important". For 2026, banks expect the exposure to remain similar overall, signalling that banks are not planning to actively adjust their loan portfolios in response to trade tensions in an international environment which is uncertain and still changing rapidly.

Changes in trade policies and the related uncertainty contributed to a tightening of credit standards and to lower loan demand by euro area firms (see Chart 23 and Table 19). Euro area banks reported a moderate net tightening impact of changes in trade policies and related uncertainty on their credit standards for loans to firms in 2025. They expect a similar impact in 2026. Euro area banks also indicated a negative impact on loan demand for 2025. For 2026, euro area banks expect the negative impact on loan demand to continue, although to a lesser degree in net terms. All in all, these results align with the overall net tightening of credit standards for loans to firms and the muted loan demand observed in 2025, influenced by both domestic and external factors.

Banks reported that their exposure to changes in trade policies and the related uncertainty led to a lower risk tolerance and to an increase in NPL ratios and other indicators of credit quality in 2025 (see Chart 24 and Table 19). Banks expect the negative impact on risk tolerance and asset quality to continue in 2026, although becoming small overall for the latter. Euro area banks broadly shared the view that the changes in trade policies and the related uncertainty had basically no impact on their capital position, market financing conditions, liquidity position, profitability, regulatory or supervisory requirements and other potential issues. For 2026, banks expect this impact to remain broadly neutral.

Annexes

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