Oct. 6 (Bloomberg) -- The European Central Bank said financial institutions tightened credit standards “significantly” in the third quarter and expect to tighten them further in the fourth.
“The increase in the net tightening of credit standards reported for the third quarter of 2011 should be seen against the background of a re-intensification of the sovereign debt crisis that undermined the perceived soundness of euro-area banks,” the Frankfurt-based ECB said today, citing its quarterly Bank Lending Survey.
The ECB also said company demand for loans declined in the third quarter for the first time in more than a year and banks expect it to drop further in the fourth quarter.
“This decline points to a significant contraction of loan demand from the corporate sector over the summer period, possibly driven by increasing overall uncertainty and a moderation in the pace of economic activity, notably investment,” the ECB said.
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