Euro-area banks reported their sharpest deterioration in access to retail funding since the ECB began its survey in 2011, while more companies said bank loan rates had risen. The findings offer a snapshot of funding conditions and borrowing costs ahead of the ECB’s rate decision on October 29. The central bank nonetheless described the deterioration in retail funding access as “mild.”
Net 9% of banks report weaker retail funding access
The ECB’s bank lending survey, released on October 27, found that a net 9% of banks reported worse access to retail funding in the third quarter, up from 3% in the second quarter. The net figure subtracts the share reporting improved conditions from the share reporting deterioration; it does not mean all banks faced the same degree of difficulty.
Banks said higher interest rates were the main reason for tighter terms on corporate loans, with funding costs and balance-sheet constraints also playing a role. By contrast, tighter credit standards were driven chiefly by changes in risk perceptions and lower risk tolerance. Funding constraints had an broadly neutral overall effect on approval standards, pointing to distinct sources of pressure on funding access, loan pricing and lending decisions.
More companies report rising loan rates
In its corporate financing survey published on October 26, the ECB found that a net 46% of surveyed firms reported higher bank loan rates, compared with 42% in the previous round. The measure covers firms that applied for a bank loan or credit line, or used a bank overdraft or credit-card overdraft. It is the share reporting rate increases minus the share reporting decreases.
The composition of the latest survey sample changed substantially, with first-time participants making up the majority. The reporting periods also varied: about half of firms answered for July to September, while the rest covered April to September. These differences complicate comparisons between survey rounds, particularly for expectations about future developments, the ECB noted.
Money and loan balances continue to grow
Tighter funding conditions have not yet translated into a contraction in outstanding money or loans. ECB data released on October 27 showed that broad money grew at an annual rate of 3.5% in September. Adjusted annual growth in loans to companies and households stood at 4.2% and 3.1%, respectively, unchanged from August. Outstanding balances can continue to expand even as new borrowing becomes more expensive or harder to obtain.
The distinction matters when interpreting the figures: loan growth measures changes in the stock of existing credit, while funding access more directly reflects current conditions facing banks and borrowers. The rising share of companies reporting higher loan rates also puts borrowing costs in focus in the corporate financing survey.
Any link to bitcoin depends on how financing conditions feed through
Changes in borrowing costs could affect bitcoin demand through investors’ access to credit and willingness to take risk, but that is a possible transmission channel, not an outcome measured by the ECB surveys. If higher credit costs lead investors to borrow less or reduce the capital they are willing to put at risk, demand for risk assets could weaken. If dollar funding remains stable and bitcoin demand holds up, evidence of spillovers from regional funding pressure into crypto markets would be limited.
A 2023 International Monetary Fund working paper found that US Federal Reserve tightening affected a common crypto price factor through investor risk-taking. Applying that finding to the relationship between European financing costs and crypto markets remains an inference; it is not a conclusion of the ECB’s bank survey. The next scheduled policy event is the ECB’s rate decision, due at 14:15 Central European Time on October 29.