Euro Lending Growth Slows, Banks Spend ECB Cash on Bonds

Growth in lending to euro zone firms and consumers slowed in March as banks scaled up purchases of government bonds, showing that an ambitious funding drive by the European Central Bank has yet to trickle down to the real economy.

Monday’s ECB data offered the first pointer to loan activity since the central bank completed the second of two tenders that flooded the euro zone’s banking sector with more than 1 trillion euros of cheap three-year cash.

The tenders, which ended in February, “have not had a very significant positive effect on loan growth,” said Berenberg Bank economist Christian Schulz.

“They have only averted an imminent credit crunch, but they have not yet had a major positive impact on growth in Europe.” Overall money growth in the currency bloc accelerated faster than expected in March, the data also showed, potentially pointing to a stronger recovery ahead.

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