The survey showed a net 38% of banks in the 20 countries that share the euro reported a decline in demand for credit from companies in the first three months of this year, the biggest proportion since the global financial crisis of 2008-09.
"The general level of interest rates was reported to be the main driver of reduced loan demand, in an environment of monetary policy tightening," the ECB said.
And banks were making it harder for the companies that did apply to get a loan or credit line, with a net 27% of lenders reporting tighter credit standards.
This matched the previous quarter at levels not previously seen since the euro zone debt crisis in 2011.
This was mirrored by March lending data, which showed growth in corporate credit slow to 5.2% year on year. Demand for home mortgages collapsed further, with a net 72% of banks surveyed reporting a decline, as households turned pessimistic about the prospects for the property market. There was a smaller decrease in demand for consumer credit and other lending to households. "Rising interest rates, weakening housing market prospects, low consumer confidence and a decline in spending on durable consumer goods contributed negatively to the demand for loans to households," the ECB said. Lending data also showed the annual increase in lending to households slow to 2.9% from 3.2%.
The ECB is in the difficult situation of having to inflict more financial pain on households and businesses to tame inflation, which was seen coming in at around 7% in April in a preliminary reading due later on Tuesday. Other central banks face a similar predicament. Australia's central bank stunned markets earlier on Tuesday with another rate hike, which it said may not be the last. (Reporting By Francesco Canepa Editing by Christina Fincher)
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