Our policies are also improving the credit channel, confirmed by the fact that credit to the private sector is at last gradually picking up. The ECB’s monetary policy measures enhance financial intermediation in a number of ways. They lower funding costs for banks, which should make lending cheaper and more profitable, thereby boosting the volume of lending.
And the banks benefit from the measures via their positive impact on the real economy. An improving real economy will eventually be reflected in expanding balance sheets and improved profitability as, for example, the share of non-performing loans in the loan stock declines. At the same time, banks’ credit risks will decline, making it easier for them to increase lending.