MILAN (Reuters) -Loans by Italian banks to businesses fell further in September, posting a new record drop, Bank of Italy data showed on Friday, following the European Central Bank's unprecedented path of monetary tightening.
Bank credit to firms fell 6.7% year-on-year in September, the biggest decline on record according to Reuters calculations based on the Bank of Italy data, following a 6.2% drop in August.
The string of interest rate hikes by the ECB, whose key rate on deposits stands at a record high of 4%, has the knock-on-effect of making it much more expensive for firms to borrow.
Residents' deposits at Italian banks continued to fall in September, albeit at a slower rate, decreasing 3.5% annually after a 5.4% fall in August.
Deposits stood at 2.44 trillion euros ($2.60 trillion) in September, up from 2.42 trillion in August.
Banks further increased bond issuance to make up for lower customer funding, with bond sales up 18.4% yearly in September.
($1 = 0.9369 euros)