Fed Survey: Economic Outlook Triggers Business Credit Tightening

Citing the economic outlook, bankers are showing signs of tightening credit for business loans 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.

For the first time since early 2012, a net 7.3 percent of bankers said they had tightened standards for large and mid-sized firms, in the previous quarter, while just 1.4 percent said they tightened for smaller businesses. Net percentages ranging from 4.4 to 7.3 said they had tightened standards on a range of commercial real estate loans.

A less certain or favorable economic outlook was the biggest reason for tightening; 63.1 percent said it was very or somewhat important in their decisions. While lenders reported tightening standards, most terms for business loans remained unchanged or eased slightly. Those who eased standards principally cited aggressive competition.

Meanwhile, 13.8 percent reported easing standards on GSE-eligible mortgages, as well as other Qualified Mortgage and jumbo loan types. Net percentages reported tightening standards for government-insured and subprime loans. A net 29.2 percent said demand for home equity lines of credit was up, but lending standards for HELOCs was little changed.

The survey also showed some easing of standards for credit cards, auto loans and other consumer loans. About 1 in 10 said they had eased car loan standards, and 6.6 percent said they had lengthened the maturity period on their auto loans.