Fed Survey: More Banks Tighten Business Credit as Demand Weakens

Bankers continued tightening credit for business loans in the last three months while they continued to ease credit standards slightly in their home mortgage and consumer loan portfolios, according to the Federal Reserve’s latest senior loan officer survey released today.

A net 11.6 percent of bankers said they had tightened standards for large and mid-sized firms in the previous quarter, while 5.8 percent said they tightened for smaller businesses. The percentages reporting tightening rose somewhat from the previous report. Net percentages said they had tightened standards on a range of commercial real estate loans, with 36.2 percent saying they tightened on CRE multifamily loans and 24.6 percent tightening on construction or land development loans.

Industry-specific problems — such as oil and gas woes, which 65 percent said will cause loan quality to deteriorate — and a less-favorable economic outlook were fingered as the main reasons for tightening. More than two-thirds cited industry-specific problems, and seven in 10 fingered the economy, as a very or somewhat important consideration. Net percentages reported that demand is weaker for C&I loans to firms of all sizes.

Meanwhile, 11.3 percent reported easing standards on GSE-eligible mortgages, as well as jumbo loan types. Net percentages saw stronger demand for all kinds of mortgages and home equity lines of credit. More loan officers reported easing standards on credit cards and auto loans, but the trend of tightening many terms on these loan types continued.

The trend of easing terms on auto loans continued to decline. For example, just 3.1 percent reported extending maturities — half from the survey prior — and the share easing minimum down payments and credit scores were largely unchanged.

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