In June 2024, the European Central Bank (ECB) began reducing its fixed interest rate for the first time since 2016, implementing a series of cuts. The rate decreased from 4.5 percent to 3.15 percent by year-end: a 0.25 percentage point cut in June, followed by additional reductions in September, October, and December. The central bank implemented other cuts in the first half of 2025, setting the rate at 2.15 percent in June 2025. This marked a significant shift from the previous rate hike cycle, which began in July 2022 when the ECB raised rates to 0.5 percent and subsequently increased them almost monthly, reaching 4.5 percent by December 2023 - the highest level since the 2007-2008 global financial crisis. How does this ensure liquidity? Banks typically hold only a fraction of their capital in cash, measured by metrics like the Tier 1 capital ratio. Since this ratio is low, banks prefer to allocate most of their capital to revenue-generating loans. When their cash reserves fall too low, banks borrow from the ECB to cover short-term liquidity needs. On the other hand, commercial banks can also deposit excess funds with the ECB at a lower interest rate. Reasons for fluctuations
The ECB’s primary mandate is to maintain price stability. The Euro area inflation rate is, in theory, the key indicator guiding the ECB's actions. When the fixed interest rate is lower, commercial banks are more likely to borrow from the ECB, increasing the money supply and, in turn, driving inflation higher. When inflation rises, the ECB increases the fixed interest rate, which slows borrowing and helps to reduce inflation.

European Union EU: NPL Ratio: SI: Corporate & Wholesale Lenders data was reported at 1.960 % in Dec 2024. This records an increase from the previous number of 1.780 % for Sep 2024. European Union EU: NPL Ratio: SI: Corporate & Wholesale Lenders data is updated quarterly, averaging 1.580 % from Jun 2015 (Median) to Dec 2024, with 39 observations. The data reached an all-time high of 4.750 % in Jun 2015 and a record low of 0.910 % in Mar 2023. European Union EU: NPL Ratio: SI: Corporate & Wholesale Lenders data remains active status in CEIC and is reported by European Central Bank. The data is categorized under Global Database’s European Union – Table EU.KB024: European Central Bank: Non-Performing Loans Ratio: by Supervisory Banking.

European Union BLS: CC: General Level of Interest Rates: Increase data was reported at 7.773 % in Apr 2025. This records an increase from the previous number of 6.917 % for Jan 2025. European Union BLS: CC: General Level of Interest Rates: Increase data is updated quarterly, averaging 7.773 % from Apr 2015 (Median) to Apr 2025, with 41 observations. The data reached an all-time high of 26.076 % in Jan 2017 and a record low of 0.020 % in Jan 2023. European Union BLS: CC: General Level of Interest Rates: Increase data remains active status in CEIC and is reported by European Central Bank. The data is categorized under Global Database’s European Union – Table EU.KB020: European Central Bank: Bank Lending Survey: Factor Affecting Demand for Loans to Household.

The benchmark interest rate In the Euro Area was last recorded at 2.15 percent. This dataset provides - Euro Area Interest Rate - actual values, historical data, forecast, chart, statistics, economic calendar and news.

EA: Credit Terms and Conditions-Consumer Credit-NPL Ratio-Household: WA of 4 Responses: FL data was reported at 1.071 % in Mar 2025. This records an increase from the previous number of 0.000 % for Sep 2024. EA: Credit Terms and Conditions-Consumer Credit-NPL Ratio-Household: WA of 4 Responses: FL data is updated quarterly, averaging 0.563 % from Sep 2018 (Median) to Mar 2025, with 14 observations. The data reached an all-time high of 3.795 % in Mar 2022 and a record low of 0.000 % in Sep 2024. EA: Credit Terms and Conditions-Consumer Credit-NPL Ratio-Household: WA of 4 Responses: FL data remains active status in CEIC and is reported by European Central Bank. The data is categorized under Global Database’s European Union – Table EU.KB022: European Central Bank: Bank Lending Survey: Non-Performing Loans Ratio: by Household.

The cooperative banking sector has developed negatively over the last five years. Industry revenue, which is made up of interest and commission income, has fallen by an average of 0.6% per year since 2019. The poor earnings performance in the years 2019 to 2021 is primarily due to the low level of interest rates and strong competition in the market. As a result of the financial crisis in 2008 and the euro crisis in 2010, the European Central Bank (ECB) was forced to keep lowering the key interest rate until it reached a low of 0% in March 2016. In 2020, the far-reaching negative effects of the coronavirus crisis prevented an increase in the key interest rate due to the associated risk of a Europe-wide recession. As a result, interest income in the sector fell, which caused difficulties for smaller cooperative banks in particular.In the current year, the sector should be able to increase commission income from the home loan and savings business and interest income from overdraft facilities and variable-interest loans in the short term, as demand is increasingly shifting from building loans to home loan and savings products due to high interest rates and overdraft facilities are increasingly in demand to cover the high cost of living. Overall, turnover in the sector is expected to increase by 0.3% year-on-year to 29.6 billion euros. However, the poor business and consumer climate is weighing on the cooperative banks. In addition, the over-indebtedness ratio is likely to stagnate or even rise slightly in the current year, which is why there is a risk that the number of non-performing loans will increase. This development is likely to cause problems for the cooperative banks.IBISWorld expects the cooperative banks' interest and commission income to fall by an average of 0.7% per year over the next five years and thus amount to 28.7 billion euros in 2029. As the banking market in Germany, which is highly fragmented by international standards, is saturated, significant changes are to be expected in the coming years. It can be assumed that banks will increasingly merge in order to increase their competitiveness, meaning that the previous consolidation of the sector is likely to accelerate. In addition, digitalisation will continue to gain in importance and the successful introduction of innovative and modern products as well as the expansion of sales channels will be decisive for a company's success.

European Union BLS: CC: Consumption Expenditure: Increase data was reported at 0.000 % in Apr 2025. This stayed constant from the previous number of 0.000 % for Jan 2025. European Union BLS: CC: Consumption Expenditure: Increase data is updated quarterly, averaging 0.024 % from Apr 2015 (Median) to Apr 2025, with 41 observations. The data reached an all-time high of 1.782 % in Apr 2018 and a record low of 0.000 % in Apr 2025. European Union BLS: CC: Consumption Expenditure: Increase data remains active status in CEIC and is reported by European Central Bank. The data is categorized under Global Database’s European Union – Table EU.KB020: European Central Bank: Bank Lending Survey: Factor Affecting Demand for Loans to Household.

Consumer Credit In the Euro Area increased to 793127 EUR Million in June from 790192 EUR Million in May of 2025. This dataset provides the latest reported value for - Euro Area Consumer Credit - plus previous releases, historical high and low, short-term forecast and long-term prediction, economic calendar, survey consensus and news.

European Union EA: Credit Terms and Conditions-NPL Ratio-Enterprise: Weighted Net Percentage: FL data was reported at 7.908 % in Mar 2025. This records an increase from the previous number of 5.847 % for Sep 2024. European Union EA: Credit Terms and Conditions-NPL Ratio-Enterprise: Weighted Net Percentage: FL data is updated quarterly, averaging 5.422 % from Sep 2018 (Median) to Mar 2025, with 14 observations. The data reached an all-time high of 25.990 % in Sep 2020 and a record low of -0.284 % in Mar 2022. European Union EA: Credit Terms and Conditions-NPL Ratio-Enterprise: Weighted Net Percentage: FL data remains active status in CEIC and is reported by European Central Bank. The data is categorized under Global Database’s European Union – Table EU.KB021: European Central Bank: Bank Lending Survey: Non-Performing Loans Ratio: by Enterprise.

In June 2025, global inflation rates and central bank interest rates showed significant variation across major economies. Most economies initiated interest rate cuts from mid-2024 due to declining inflationary pressures. The U.S., UK, and EU central banks followed a consistent pattern of regular rate reductions throughout late 2024. In the first half of 2025, Russia maintained the highest interest rate at 20 percent, while Japan retained the lowest at 0.5 percent. Varied inflation rates across major economies The inflation landscape varies considerably among major economies. China had the lowest inflation rate at 0.1 percent in June 2025. In contrast, Russia maintained a high inflation rate of 9.4 percent. These figures align with broader trends observed in early 2025, where China had the lowest inflation rate among major developed and emerging economies, while Russia's rate remained the highest. Central bank responses and economic indicators Central banks globally implemented aggressive rate hikes throughout 2022-23 to combat inflation. The European Central Bank exemplified this trend, raising rates from 0 percent in January 2022 to 4.5 percent by September 2023. A coordinated shift among major central banks began in mid-2024, with the ECB, Bank of England, and Federal Reserve initiating rate cuts, with forecasts suggesting further cuts through 2025 and 2026.

Mortgage interest rates in Europe soared in 2022 and remained elevated in the following two years. In many countries, this resulted in mortgage interest rates across the region more than doubling. In the fourth quarter of 2024, the average mortgage interest rate in the UK stood at *** percent. Belgium had the lowest rate, at **** percent, while Poland had the highest, at *** percent. Why did mortgage interest rates increase? Mortgage rates have risen as a result of the European Central Bank (ECB) interest rate increase. The ECB increased its interest rates to tackle inflation. As inflation calms, the ECB is expected to cut rates, which allows mortgage lenders to reduce mortgage interest rates. What is the impact of interest rates on home buying? Lower interest rates make taking out a housing loan more affordable, and thus, encourage home buying. That can be seen in many countries across Europe: In France, the number of residential properties sold rose in the years leading up to 2021, and fell as interest rates increased. The number of houses sold in the UK followed a similar trend.

EA: Credit Terms and Conditions-Consumer Credit-NPL Ratio-Household: WA of 2 Responses: FL data was reported at 7.458 % in Mar 2025. This records an increase from the previous number of 2.193 % for Sep 2024. EA: Credit Terms and Conditions-Consumer Credit-NPL Ratio-Household: WA of 2 Responses: FL data is updated quarterly, averaging 3.362 % from Sep 2018 (Median) to Mar 2025, with 14 observations. The data reached an all-time high of 17.136 % in Sep 2020 and a record low of 1.060 % in Mar 2022. EA: Credit Terms and Conditions-Consumer Credit-NPL Ratio-Household: WA of 2 Responses: FL data remains active status in CEIC and is reported by European Central Bank. The data is categorized under Global Database’s European Union – Table EU.KB022: European Central Bank: Bank Lending Survey: Non-Performing Loans Ratio: by Household.

After falling several years in a row, the non-performing loans (NPL) ratio in the euro area and other EU countries under the single supervisory mechanism increased slightly in 2023 and 2024. In the wake of the financial crisis, non-performing loans became a major concern for policymakers, financial supervisors as well as market participants across the European Union. Non-performing loans are those that are in default, or are close to being in default. Many standard contract terms specify that loans become non-performing after being in default for 90 days, but this can vary. In late 2024, Poland was one of the countries with the highest NPL ratio in Europe.

EA: Credit Standards-NPL Ratio-Enterprise: Weighted Diffusion: FL data was reported at 6.113 Index in Mar 2025. This records an increase from the previous number of 3.141 Index for Sep 2024. EA: Credit Standards-NPL Ratio-Enterprise: Weighted Diffusion: FL data is updated quarterly, averaging 3.027 Index from Sep 2018 (Median) to Mar 2025, with 14 observations. The data reached an all-time high of 14.633 Index in Sep 2020 and a record low of 0.590 Index in Mar 2022. EA: Credit Standards-NPL Ratio-Enterprise: Weighted Diffusion: FL data remains active status in CEIC and is reported by European Central Bank. The data is categorized under Global Database’s European Union – Table EU.KB021: European Central Bank: Bank Lending Survey: Non-Performing Loans Ratio: by Enterprise.

August 2024 marked a significant shift in the UK's monetary policy, as it saw the first reduction in the official bank base interest rate since August 2023. This change came after a period of consistent rate hikes that began in late 2021. In a bid to minimize the economic effects of the COVID-19 pandemic, the Bank of England cut the official bank base rate in March 2020 to a record low of *** percent. This historic low came just one week after the Bank of England cut rates from **** percent to **** percent in a bid to prevent mass job cuts in the United Kingdom. It remained at *** percent until December 2021 and was increased to one percent in May 2022 and to **** percent in October 2022. After that, the bank rate increased almost on a monthly basis, reaching **** percent in August 2023. It wasn't until August 2024 that the first rate decrease since the previous year occurred, signaling a potential shift in monetary policy. Why do central banks adjust interest rates? Central banks, including the Bank of England, adjust interest rates to manage economic stability and control inflation. Their strategies involve a delicate balance between two main approaches. When central banks raise interest rates, their goal is to cool down an overheated economy. Higher rates curb excessive spending and borrowing, which helps to prevent runaway inflation. This approach is typically used when the economy is growing too quickly or when inflation is rising above desired levels. Conversely, when central banks lower interest rates, they aim to encourage borrowing and investment. This strategy is employed to stimulate economic growth during periods of slowdown or recession. Lower rates make it cheaper for businesses and individuals to borrow money, which can lead to increased spending and investment. This dual approach allows central banks to maintain a balance between promoting growth and controlling inflation, ensuring long-term economic stability. Additionally, adjusting interest rates can influence currency values, impacting international trade and investment flows, further underscoring their critical role in a nation's economic health. Recent interest rate trends Between 2021 and 2024, most advanced and emerging economies experienced a period of regular interest rate hikes. This trend was driven by several factors, including persistent supply chain disruptions, high energy prices, and robust demand pressures. These elements combined to create significant inflationary trends, prompting central banks to raise rates in an effort to temper spending and borrowing. However, in 2024, a shift began to occur in global monetary policy. The European Central Bank (ECB) was among the first major central banks to reverse this trend by cutting interest rates. This move signaled a change in approach aimed at addressing growing economic slowdowns and supporting growth.

EA: Credit Standards-Consumer Credit-NPL Ratio-Household: Weighted Diffusion: FL data was reported at 5.856 Index in Mar 2025. This records an increase from the previous number of 0.865 Index for Sep 2024. EA: Credit Standards-Consumer Credit-NPL Ratio-Household: Weighted Diffusion: FL data is updated quarterly, averaging 1.628 Index from Sep 2018 (Median) to Mar 2025, with 14 observations. The data reached an all-time high of 11.103 Index in Sep 2020 and a record low of -0.518 Index in Mar 2022. EA: Credit Standards-Consumer Credit-NPL Ratio-Household: Weighted Diffusion: FL data remains active status in CEIC and is reported by European Central Bank. The data is categorized under Global Database’s European Union – Table EU.KB022: European Central Bank: Bank Lending Survey: Non-Performing Loans Ratio: by Household.

The European banking sector showed significant disparities in net interest margins (NIM) during the last quarter 2024. Poland and Hungary topped the rankings with NIMs of *** percent and *** percent, respectively. In contrast, several Western European nations reported markedly lower figures: Germany and Denmark at *** percent, France at *** percent. NIM, a key indicator of bank profitability, measures the difference between interest income earned from lending activities and interest paid to depositors, expressed as a percentage of interest-earning assets. Profitability and stability Low profitability has been highlighted several times by the ECB as a key risk to the financial stability of the Euro area. There are several ways to examine profitability in the banking sector, such as the cost-to-income ratio. Prolonged low profitability can have a knock-on effect on an economy’s growth. On the other hand, sustained periods of higher than average profitability can also mean trouble, as was seen in the period running up to the financial crisis. Other key measures There are several other metrics that can also be used. Return on equity (ROE), which divides net income by shareholders' equity, looks at how well a company’s management is using its assets to create profits. Another key measure of a bank's profitability is to look at the return on assets (ROA), which divides a bank’s net income by its total assets during a given period.

European Union EA: Credit Standards-NPL Ratio-Enterprise: Weighted Net Percentage: BL data was reported at 13.032 % in Mar 2025. This records an increase from the previous number of 9.176 % for Sep 2024. European Union EA: Credit Standards-NPL Ratio-Enterprise: Weighted Net Percentage: BL data is updated quarterly, averaging 4.893 % from Sep 2018 (Median) to Mar 2025, with 14 observations. The data reached an all-time high of 13.032 % in Mar 2025 and a record low of 0.919 % in Mar 2023. European Union EA: Credit Standards-NPL Ratio-Enterprise: Weighted Net Percentage: BL data remains active status in CEIC and is reported by European Central Bank. The data is categorized under Global Database’s European Union – Table EU.KB021: European Central Bank: Bank Lending Survey: Non-Performing Loans Ratio: by Enterprise.

European Union BLS: HP: General Level of Interest Rates: Considerably Higher data was reported at 3.211 % in Apr 2025. This records an increase from the previous number of 2.319 % for Jan 2025. European Union BLS: HP: General Level of Interest Rates: Considerably Higher data is updated quarterly, averaging 1.455 % from Apr 2015 (Median) to Apr 2025, with 41 observations. The data reached an all-time high of 5.020 % in Oct 2015 and a record low of 0.000 % in Jul 2024. European Union BLS: HP: General Level of Interest Rates: Considerably Higher data remains active status in CEIC and is reported by European Central Bank. The data is categorized under Global Database’s European Union – Table EU.KB020: European Central Bank: Bank Lending Survey: Factor Affecting Demand for Loans to Household.

European Union BLS: HP: General Level of Interest Rates: Somewhat Higher data was reported at 53.050 % in Apr 2025. This records an increase from the previous number of 46.266 % for Jan 2025. European Union BLS: HP: General Level of Interest Rates: Somewhat Higher data is updated quarterly, averaging 20.050 % from Apr 2015 (Median) to Apr 2025, with 41 observations. The data reached an all-time high of 53.050 % in Apr 2025 and a record low of 0.000 % in Oct 2023. European Union BLS: HP: General Level of Interest Rates: Somewhat Higher data remains active status in CEIC and is reported by European Central Bank. The data is categorized under Global Database’s European Union – Table EU.KB020: European Central Bank: Bank Lending Survey: Factor Affecting Demand for Loans to Household.