EUROZONE banks are set to restrict business lending for the first time in two-and-a-half years, a new poll has shown, presenting an opportunity for alternative finance providers.
The European Central Bank (ECB) survey on Tuesday found that banks in the economic bloc stopped easing credit standards for companies in the three months to September and are expected to tighten them in the next few months.
“Today’s ECB poll serves as an early warning sign of lower growth ahead,” said James Sherwin-Smith, chief executive at UK alternative finance platform Growth Street.
“For banks to be reducing their appetite for lending to businesses at a time when commercial finance is still yet to recover and wholesale finance costs are at an unprecedented low is deeply concerning.”
Banks have reined in their lending due to a lower risk appetite and concerns about profitability amid negative deposit rates, according to the poll of 141 lenders.
“We expect that this will serve as further impetus for the growing alternative finance sector as a source of both finance for those looking to borrow, and a strong investment opportunity for those seeking better returns in an environment of negative real interest rates,” said Sherwin-Smith.
Nearly every bank in the Eurozone said their bottom line had been hit by negative interest rates and a vast majority predict their profits will continue to plummet in the new year, the survey found.