ECB purchase of assets stimulate lending in Eurozone

Noam Stiekema

The European Central Bank said that its program for the purchase of assets stimulate lending in the Eurozone, although some European lenders are experiencing considerable difficulties. ECB started buying private assets last year and expand the program in March, including government bonds to revive inflation. In its bank lending survey for the first quarter of […]

Eur

EurThe European Central Bank said that its program for the purchase of assets stimulate lending in the Eurozone, although some European lenders are experiencing considerable difficulties. ECB started buying private assets last year and expand the program in March, including government bonds to revive inflation. In its bank lending survey for the first quarter of 2015, released Tuesday, the Frankfurt-based institution said that the strategy is already having an impact.

“The banks of the euro area suggest that use the additional liquidity from their sales of marketable assets associated with the program, especially for lending. The program to buy assets seems to be effective in supporting lending to the economy of the Eurozone”, said ECB.

ECB President Mario Draghi said that the institution plans to spend 60 billion EUR per month until at least September 2016, which will raise prices for consumers and boost the supply of credit. Yet almost one fifth of the region’s banks expect profits to retreat due to the decline in net interest margins. The central bank will hold monetary policy meeting in Frankfurt on Wednesday to assess the quantitative easing strategy.

In Germany, where the Bundesbank and its President Jens Vaydman led opposition to large-scale bond purchases, almost no bank intends to sell assets according to a national survey released Tuesday. German lenders also indicated that the program does not expect the ECB’s quantitative easing have some impact on credit standards. The survey among Eurozone showed that 28% of banks in the region use the additional liquidity to provide loans to businesses. 17 percent said they use the funds for mortgages and 18 percent – for consumer credit and other loans to households.

Most banks said they also intend to use the additional liquidity to increase lending in these categories over the next six months. Almost half of the banks surveyed, even said that the program for the purchase of assets had a positive effect on their conditions of market financing. However, a net 18% of Eurozone banks have stated that the program will have a negative impact on their profitability over the next six months.

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