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Corporate loan demands are expected to surge in the third quarter, with just a slight tightening of credit standard or loan approval criteria, euro banks suggest.

The European Central Bank (ECB) surveyed the bloc’s biggest lenders and suggest that credit standards remained steady in the second quarter, after an initial tightening last year.

However, on the demand side, the figures suggest that firms are now more willing to invest.

The ECB also said that “For the first time since the third quarter of 2019, firms’ financing needs for fixed investment contributed positively to loan demand, suggesting that firms may become less reluctant to invest,”.

This week, the ECB meeting will likely focus on tailoring the bank’s stimulus to better fit its new strategy and therefore, may trump any real-time data – despite lending surveys normally being a key consideration in ECB policy decisions.

Earlier this month, the ECB also revealed an altered inflation target and suggested that longer periods will weaken inflation, as seen in recent years, so may require more vigorous and persistent stimulus effort.

It is unlikely that the ECB will reveal new stimulus measures to align policy with the strategy, nevertheless, it will signal an even longer period of stimulus, hoping to lift inflation expectations. Therefore, it will eventually get actual price growth back to its two per cent target – a target that has been missed for almost a decade.

Banks also expect a further net increase in demand for loans by both firms and households, the survey concluded. Not only this but for mortgages, credit standards are expected to remain reasonably steady.

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