Banks set to see rise in loan demand

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Around one in five banks across the eurozone expect companies to approach them for more credit as the year draws to a close, with those in Germany and France most optimistic, the European Central Bank said yesterday.

The upbeat forecast bodes well for an improvement in the bloc, where economic growth has been grinding to a virtual halt. Much of the blame for the slowdown has been blamed on a dearth of credit to firms to expand their businesses.

The outlook depends, however, on the country in question and banks in Italy, for example, remain downbeat about credit demand.

In its closely-watched survey of lending, the ECB asks banks whether they plan to make it easier for companies and households to borrow as well as how much demand they expect.

While the cost of bank loans has discouraged many companies, especially those in Greece or Ireland, for example, from borrowing, modest demand also reflects low confidence, as a conflict with Russia over Ukraine adds to the gloomy outlook.

While most banks have not been changing their credit standards for companies that want to borrow, the ECB survey of more than 130 banks found that there was a slight positive tendency to do so.

Credit standards are the hurdles towards giving a loan such as the security that is required.