By Gabi Thesing
Nov. 7 (Bloomberg) -- Banks are making it harder and more costly for companies in Europe to get loans as the economic outlook worsens, the European Central Bank said.
Credit standards for loans to companies tightened ``significantly'' in the third quarter, the Frankfurt-based ECB said in its quarterly bank lending survey published today. ``Expectations for the fourth quarter of 2008 point to the net tightening of credit standards being broadly unchanged from the net tightening observed in the third quarter,'' it said.
Banks in Europe remain reluctant to lend to each other even after the ECB flooded them with cash and governments announced rescue packages to prevent banking failures. The world's biggest financial companies have posted almost $700 billion in writedowns since the start of last year, when the collapse of the U.S. subprime mortgage market triggered a global credit crisis.
The ECB said the main reasons that banks are tightening credit standards are ``expectations regarding future economic activity'' and ``banks' ability to access market financing.''
``The euro area is experiencing the most severe credit crisis since its inception'' in 1999, said Aurelio Maccario, an economist at Unicreditgroup in Milan. There's a risk the economy will fall into ``a more severe recession,'' he said.
The net percentage of banks reporting a tightening of loan standards for companies surged 22 percentage points to 65 percent in the third quarter, the ECB said. Banks also tightened standards for loans to consumers, including those for house purchases, it said.
To contact the reporter on this story: Christian Vits in Frankfurt at cvits@bloomberg.net
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