Biggest tightening in loans to firms since 2011
Drop in demand for mortgages is sharpest on record
ECB meets on Thursday to set path for rates

FRANKFURT, Jan 31 Reuters Euro zone banks have tightened companies39; access to credit by the most since the 2011 debt crisis and expect to continue doing so as they turn more pessimistic on the economy amid rising borrowing costs, a European Central Bank survey showed on Tuesday.

But demand for loans from enterprises and households also fell for the same reasons, with the drop in demand for mortgages the biggest on record, the ECB39;s quarterly Bank Lending Survey showed.

The results showed the ECB39;s steady diet of interest rate hikes, which began in the summer, was taking its toll on the economy, and they may play into the hands of policymakers arguing for smaller rate hikes in the coming months at a meeting on Thursday.

A net 26 of banks polled by the ECB said they made their standards stricter for approving loans to companies in the final quarter of last year, the biggest tightening since 2011.

Banks also restricted access to consumer credit and mortgages, a trend that banks expect to continue this quarter.

Risks related to the economic outlook, industry or firmspecific situation and banks risk tolerance continued to have a tightening impact on credit standards, the ECB said.

The central bank for the euro zone has been battling the briskest inflation in decades, the result of higher energy costs but also the…