European Central Bank Survey Shows Lending Getting Tighter; Firms Still Expect Higher Long-Term Inflation
SDG 8: Decent Work and Economic Growth | SDG 9: Industry, Innovation and Infrastructure
Institutions: Ministry of Finance | Reserve Bank of India (RBI)
The European Central Bank (ECB)’s latest Survey on the Access to Finance of Enterprises (SAFE) for Q3 2025 confirms that the central bank’s policy actions are having an effect on credit. Companies across the euro area, especially small and medium-sized enterprises (SMEs), reported a marginal net tightening of bank lending conditions. This tightening was observed not just in higher interest rates, but also in increased collateral requirements and other financing fees. As a result of this slight drop in loan availability relative to stable firm demand, the bank loan financing gap widened marginally to a net 1%.
While the availability of credit is being constrained, the survey presented a major challenge for the ECB: firms’ long-term inflation expectations remained stubbornly high at a median of 3.0% for the five-year horizon. This expectation sits significantly above the ECB’s official 2% target. Most firms continue to believe that the primary obstacle to accessing finance is the general economic outlook, while also noting a slight improvement in banks’ overall willingness to lend.
The findings confirm that the ECB’s rate hikes are successfully transmitting to the credit market by making loans more expensive and harder to get. However, the persistent divergence between the official target and long-term business expectations shows that inflation is not yet fully anchored, which signals the need for the central bank to maintain a cautious and data-dependent monetary policy stance for the foreseeable future.
What is the “bank loan financing gap” tracked by the ECB’s SAFE survey?→ The bank loan financing gap is an index that measures the difference between enterprises’ self-reported need for bank loans and the availability of bank loans provided by financial institutions. A positive gap (currently net 1%) indicates that, on average, firms perceive that their need for bank loans is greater than the amount banks are willing or able to supply.
Follow the full update here: Survey on the Access to Finance of Enterprises: lending conditions tightened marginally, while financing needs and availability remained broadly unchanged