ECB survey shows eurozone banks tightened credit in Q2

The European Central Bank published its quarterly Bank Lending Survey on Tuesday, revealing that eurozone banks continued to restrict access to credit in the second quarter of 2026 as the war in Iran drives up energy costs and clouds the economic outlook across the bloc.

Tightening Across the Board

A net 7% of banks reported tightening corporate credit standards in the three months to June, down from 10% in the first quarter but still above long-run averages, according to the ECB's survey of roughly 150 major lenders across the euro area. Banks also tightened standards for housing loans and consumer credit, with net percentages of 9% and 12% respectively. The automotive and energy-intensive manufacturing sectors bore the brunt of the restrictions, with car manufacturing seeing the most pronounced tightening in the first half of the year.ecb.europa+1

"The outcome of US-Iran negotiations continues to be a source of uncertainty, with banks revising their assessments as talks evolve," the ECB said, noting that some lenders applied additional tightening specifically because of geopolitical tensions and energy developments. Perceived risks to the economic outlook and lower risk tolerance remained the primary drivers across loan categories. Germany, Spain and France reported tighter standards for firms, while Italian banks eased slightly.ecb.europa+1

Rising Rejections, Mixed Demand

Despite the tighter credit environment, business loan demand edged higher, with a net 3% of banks reporting increased applications — confounding expectations of a 10% decline. Demand was supported by firms seeking working capital and inventory financing as input costs rose and delivery times lengthened. However, a greater share of applications was turned away: the net share of rejected corporate loan applications rose to 6%, the highest since late 2024.ecb.europa

Housing loan demand fell sharply, with a net 15% of banks reporting weaker applications, driven by deteriorating consumer confidence and higher interest rates following the ECB's June rate hike. Demand for consumer credit also softened slightly.ecb.europa+1

Outlook Remains Cautious

Banks expect further tightening in the third quarter, though at a more moderate pace — a net 5% anticipate stricter corporate standards, while consumer credit standards are expected to tighten by 11%. Housing loan demand is forecast to continue declining. Access to retail and wholesale funding also deteriorated in the quarter, with banks expecting conditions to worsen further over the summer.ecb.europa+1

The findings underscore how the Iran conflict — which has disrupted energy markets since early 2026 — continues to weigh on credit conditions even as the ECB navigates between fighting inflation and supporting growth. Morgan Stanley ↘ 0.89% projected in March that the ECB would raise rates twice this year in response to the energy shock, and the central bank delivered the first of those increases in June.morganstanley+2