The October 2025 Bank Lending Survey (BLS) conducted by the European Central Bank shows that euro area banks reported a slight tightening of credit standards for loans or credit lines to enterprises during the third quarter of 2025.

The net percentage of banks reporting stricter standards was four percent, following a broadly unchanged stance in the previous quarter. This outcome was contrary to banks’ earlier expectations that standards would remain stable. 

The tightening was mainly attributed to perceived risks to the economic outlook, persistent geopolitical uncertainty, and trade-related tensions. These factors led banks to apply more discrimination across firms and sectors and to intensify monitoring of loan portfolios.

For household lending, banks reported unchanged credit standards for housing loans and a moderate tightening for consumer credit and other household borrowing, with a net tightening of five percent. 

The small net easing for housing loans that had been expected in the previous survey did not occur. Risk perceptions were the main factor behind the tightening for consumer credit. 

Looking ahead to the fourth quarter of 2025, banks expect credit standards to remain broadly unchanged for corporate loans, to tighten slightly for housing loans, and to tighten further for consumer credit.

Loan terms and conditions, which reflect the actual agreements in loan contracts, remained broadly unchanged for corporate loans but eased somewhat for housing loans and consumer credit. At the same time, banks reported an increase in loan rejections across all categories, with the sharpest rise in consumer credit. The rate of housing loan rejections rose for the first time since early 2024.

On the demand side, banks indicated a modest net increase in loan demand from firms—about two percent—but overall demand remained weak. The rise was driven mainly by lower lending rates and greater needs for refinancing or debt restructuring, while investment and working capital demands were neutral. 

Global uncertainty and trade tensions continued to dampen demand. In contrast, demand for housing loans rose strongly, with a net increase of 28 percent, supported by declining interest rates and improved housing market prospects. 

Demand for consumer credit remained virtually unchanged as reduced consumer confidence offset the effects of lower borrowing costs. For the fourth quarter, banks expect steady loan demand from firms, a more moderate rise in housing loan demand, and a small increase in consumer credit demand.

Banks’ access to funding remained largely stable during the third quarter. Access to money markets and securitisation eased slightly, and funding via debt securities improved more noticeably. Looking ahead, banks anticipate slightly better access to retail funding, marginal tightening in money markets, and broadly stable conditions for other funding channels.

The ongoing reduction of the ECB’s monetary policy asset portfolio has had a broadly neutral effect on banks’ market financing conditions and liquidity positions, while contributing to higher holdings of euro area sovereign bonds. 

Its influence on lending conditions has been limited, reflecting the predictable pace of balance-sheet adjustment. Banks expect this neutral impact to continue over the next six months.

Regarding credit risk, banks noted that non-performing loan ratios and other credit quality indicators exerted a small tightening impact on corporate lending standards, but had no effect on housing or consumer loans. 

For the next quarter, banks foresee a more significant tightening effect of credit quality indicators on both corporate and consumer credit.

Finally, banks reported that recent ECB key interest rate decisions continued to compress net interest margins over the past six months, although loan volumes increased. They expect this pattern to persist, with slightly smaller effects, over the next half year.

Conducted between 19 September and 7 October 2025, the quarterly survey gathered responses from all 154 participating banks, achieving a full 100 percent response rate. 

The findings provide an updated view of bank lending behaviour in the euro area and signal cautious sentiment as institutions balance economic uncertainty with stable funding conditions and strong household credit demand.