German banks tighten lending to companies again as loan demand falls for the first time in over two years

Companies in Germany are finding it harder to borrow from banks. A net 6% of surveyed banks tightened their standards for business loans in the third quarter of 2026, after 10% in the second quarter, the Deutsche Bundesbank said on 27 October 2026. That was a little less tightening than in the second quarter, but a little more than banks had planned in the July survey. They cited higher credit risk, mainly because of sector-specific and firm-specific factors and the subdued economic situation and outlook.

The results come from the Bank Lending Survey, which is carried out four times a year. In Germany 33 banks took part, with a response rate of 100%; the survey ran from 21 September to 6 October 2026. The net percentage is the difference between the share of banks that tightened their standards and the share that eased them.

Demand falls, especially among smaller firms

The more striking change is in demand, which fell in every loan category in the third quarter. For business loans it was the first decline in more than two years, even though banks had expected demand to rise. The fall was concentrated among small and medium-sized enterprises and in long-term loans. Banks put it down above all to the higher general level of interest rates, which weighed on demand much more than in the second quarter. Only firms' need to finance inventories and working capital still lifted demand.

Terms also got tougher. On balance, banks made the terms and conditions of business loans more restrictive because lending rates rose and margins on riskier loans widened. The share of loan applications rejected rose again in all three categories. For the fourth quarter, banks plan only minor further tightening and expect business demand to pick up.

Two factors, taken individually, pointed the other way: banks reported growing competition and, for the first time in more than two years, a higher risk tolerance. Their own funding conditions worsened slightly, particularly access to customer deposits.

Households: easier standards, weak demand

For mortgages, banks eased their standards on balance, with a net percentage of minus 4%. Demand nevertheless fell considerably for the second quarter running, by more than banks had expected. They attribute this mainly to higher interest rates and weaker consumer confidence, and suspect that households increasingly approached competing lenders. Standards for consumer credit were unchanged, and demand fell less sharply than in the two previous quarters.

The euro area moves the same way

Across the euro area the picture is similar but sharper. A net 9% of the 159 banks surveyed tightened their standards for business loans, the European Central Bank said, more than the 5% they had expected. For demand from firms the net percentage was minus 6%, meaning that on balance 6% of banks reported a fall, after plus 3% in the second quarter; for housing loans it was minus 27%. Banks expect further tightening in the fourth quarter. Several banks expect demand for loans to finance digital infrastructure, particularly data centres, to rise gradually but steadily.

Companies tell the same story. In the ECB's Survey on the Access to Finance of Enterprises (SAFE), a net 46% of euro area firms reported higher interest rates on bank loans in the third quarter, up from 42% in the previous quarter, and a net 5% of firms reported that bank loans had become less available. The survey covered 12,822 enterprises between 26 August and 2 October 2026. The ECB's Governing Council will announce its next monetary policy decision on 29 October.