Surge in bank lending unlikely to last

Euro-zone bank lending growth has jumped in recent months, as firms borrowed to tide themselves over while their revenues collapsed during lockdown. (See Chart 1.) At the same time, banks’ willingness to lend has been boosted by government loan guarantees and cheap funding from the ECB. Corporate bond issuance has also surged, supported by the Bank’s asset purchases. But now that economies are re-opening and revenues are recovering, firms’ demand for credit is likely to fall and lending growth should slow. So we think the immediate risks to inflation and financial stability from faster lending growth are limited.