Euro area banks tighten lending standards further as trade tensions rise: ECB survey
The European Central Bank (ECB) reported on Monday that euro area banks tightened lending standards further in the second quarter of 2026, as trade tensions and economic uncertainty increased risks for businesses.
According to the ECB's latest bank lending survey, credit standards became moderately stricter in the second quarter, while business borrowing picked up slightly and household demand for loans weakened. The survey found that banks' internal lending guidelines and loan approval criteria became more stringent amid concerns about trade tensions, particularly those linked to exports to the United States. The ECB had previously reported that banks tightened lending conditions in 2025 due to similar concerns .
The ECB's findings come as central banks worldwide take action to address inflation and economic uncertainty. On Friday, Russia's central bank cut its key interest rate by 25 basis points to 14% in a surprise move and raised its inflation forecast for 2026 to 6-7%. The bank also cut its GDP growth forecast to 0-1%. The rate cut defied market expectations for no change .
In Singapore, the central bank tightened monetary policy on Monday, citing expectations of higher core inflation that is expected to remain elevated until mid-2027. The Monetary Authority of Singapore (MAS) said it expects core inflation to remain high and only ease gradually in the second half of 2027 .
In the United States, the Federal Reserve is meeting this week, with Wall Street leaning toward a potential interest rate hike to address rising inflation. Recent surges in energy prices and new tariffs announced by the Trump administration have contributed to inflation concerns. Higher energy costs have been taking up a bigger share of household budgets, shifting spending toward more basic needs like gasoline .
Meanwhile, the Bank of Japan is expected to signal further rate hikes as price pressures build in the world's third-largest economy. The bank is facing pressure as Tokyo runs out of easy policy choices to address inflation .
In Iran, the central bank is implementing bank reforms and tighter credit controls in an effort to curb inflation. The measures include limiting money creation and tightening supervision of troubled banks .
In the euro area, banks have been tightening lending standards since 2025 due to trade tensions and economic uncertainty. The latest ECB bank lending survey shows that this trend continued in the second quarter of 2026, with credit standards becoming moderately stricter. Business borrowing picked up slightly, but household demand for loans weakened, according to the survey.
Global economic conditions are being affected by several factors, including trade tensions and energy price volatility. Oil prices sank more than 4% on Monday as markets reacted to a pause in attacks on Iranian coastal areas and infrastructure. However, recent surges in energy prices have contributed to inflation concerns worldwide. Trade tensions, particularly between the United States and other countries, have also increased risks for businesses and prompted cautious credit practices among banks.
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