Fed Survey: Little Change in Lending Standards Amid Weaker C&I Demand

Bankers left commercial and industrial lending standards mostly unchanged amid weakening demand in the fourth quarter of 2019, according to the Federal Reserve’s senior loan officer survey released today. On net, fewer banks reported tightening on commercial real estate loans in the fourth quarter than in the third, while demand for those loans remained relatively unchanged. Residential real estate lending standards eased slightly as fewer respondents noted stronger demand.

While banks reported virtually no net change in standards for C&I loans, small net percentages reported easing terms, including costs of credit lines, rate spreads and covenants, while nearly one in 10 on net reported charging higher premiums on riskier loans and employing interest rate floors more often for large or midsize borrowers. On net, over 11% of banks said that demand for C&I loans was weaker; the most commonly cited reasons for weaker demand were decreased business investment and declining need for M&A financing.

On the CRE side, 7.4% said they tightened standards somewhat on construction and land development loans, while 1.4% said they tightened somewhat on loans secured by nonfarm nonresidential properties. On net, no banks tightened on loans secured by multifamily residential properties. Meanwhile, small net percentages reported easing standards in most residential mortgage loan categories. On net, one in five banks reported moderately or substantially stronger demand for GSE-eligible mortgages with smaller proportions reporting higher demand for jumbo loans. However, 17.2% said they observed weaker demand for home equity lines of credit.

On net, 13.7% of banks tightened standards for credit card loans, mostly via lower limits and higher minimum credit scores, while 8.9% tightened on auto loans.