Corporate lending in eurozone periphery slumps further in Sept

Lending to companies in the euro zone periphery continued to fall in September, while banks in core countries kept lending more, ECB data showed on Monday, highlighting the divergence in economic strength in the bloc.

The figures from the European Central Bank showed corporate lending decreased on an annual basis in countries like Italy, Spain, Portugal and Ireland, but continued to rise in Germany, Finland, France and Austria.

Weak lending has been one of the main impediments to growth as European companies rely mostly on funding from banks, which have been reluctant to hand out credit as they adapt to stricter regulation and went through the ECB’s landmark asset review.

The review concluded on Sunday that roughly one in five euro zone top banks failed the health checks at the end of last year but most had since repaired their finances. The ECB found the biggest problems in Italy, Cyprus and Greece.

Lending in Italy continued to decline, falling by 3.3 percent compared to a year earlier, while Cyprus showed a slower decline of 0.9 percent and Greece of 4.6 percent.

Ireland recorded a 12.5 percent decline in corporate lending, its steepest drop since July 2011, while Slovenia’s annual decline of 15.4 percent was the fastest since records started in January 2005.

The ECB hopes that banks will feel in a more comfortable position to lend now that the review is over. The ECB’s bank lending survey due on Wednesday will also give more detail on how demand for loans is developing as the recovery slows.


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