Impact of ECB’s policy rate changes on corporate loan rates varies strongly across countries

Abstract

A significant proportion of the stock of corporate loans in the euro area consists of fixed rate loans. This is a factor slowing the transmission of monetary policy. It is why the interest rate increases which the European Central Bank (ECB) began making in 2022 have not yet passed through to the loan servicing costs of a large proportion of companies. Correspondingly, in many companies the ECB’s recent cuts in its key policy rates are not yet reflected in lower borrowing costs. The proportion of corporate loans that are fixed rate varies between industries, but the difference is even more significant across euro area countries. For example, in Germany and France, the majority of corporate loans are tied to a fixed interest rate, whereas in Finland, the proportion of fixed rate loans is very small.