(Adds economists' comments, detail, background)
* Banks see steady tightening of loan standards in Q3
* Demand for credit to remain weak
* Survey findings underscore policy dilemma for ECB
By Eva Kuehnen
FRANKFURT, July 25 (Reuters) - Banks expect to toughen their lending rules further in coming months and see feeble demand for loans from firms and consumers, underscoring the dilemma European Central Bank policymakers face as they try to revitalise the euro zone's economy.
In its latest quarterly Bank Lending Survey, the ECB said 11 percent of banks that took part made it harder for companies to borrow in the second quarter, whereas only one percent eased their requirements. The 10 percent net figure was slightly more than the 9 percent in the first quarter.
Banks have been continually tightening their lending standards over the last three years in the wake of the euro zone's troubles and to cope with stricter regulation, a trend which is corsetting economic growth in the currency bloc.
The ECB's survey made grim reading.
"Looking ahead to the third quarter, banks expect a continued decline in the net demand for loans, both for enterprises and households, even if less negative than in the second quarter," the survey said.
Banks also expect to keep tightening credit standards for loans at a stable rate in the third quarter.
The survey is further proof that the beneficial impact of the ECB's injection of more than 1 trillion euros in ultra-cheap loans to banks has evaporated quickly.
It could prompt the ECB to consider repeating the move, something they have shown little appetite for as yet.
Banks that took part in the survey, which was conducted over a two-week period which straddled the most recent EU summit on June 28-29, revealed that the euro zone crisis had had a greater impact on banks' funding conditions than in the first quarter.
Demand for mortgages, often seen as a forerunner of lending trends, saw its recent demand slump slow in the second quarter. A net 21 percent of banks saw a drop in demand compared with 43 percent in the first quarter.
More general consumer demand for loans remained broadly unchanged with a net 27 percent of banks seeing a slowdown.
Demand for loans is weakening as the euro zone economy heads for its second recession since 2009. Business surveys showed on Tuesday that Europe's private sector looked set for a prolonged slump.
Banks in the euro zone's periphery are particularly strained, faced with elevated funding costs in the market as investors demand a higher premium to invest in countries like Spain and Italy that are now at the centre of the debt crisis.
Q2 Q1 - Loans to businesses Reporting tighter credit standards this quarter 10 9 Reporting higher loan demand this quarter -25 -30 Expecting tighter credit standards next quarter 10 2 Expecting higher loan demand next quarter -8 7 - Mortgage loans to households Reporting tighter credit standards this quarter 13 17 Reporting higher loan demand this quarter -21 -43 Expecting tighter credit standards next quarter 5 7 Expecting higher loan demand next quarter -10 -12
The survey of 130 banks was conducted from June 21 to July 5.
For a copy of the survey, click on: here (Reporting by Eva Kuehnen and Marc Jones; editing by Stephen Nisbet)