Fed survey: Business lending standards tightened in Q3 2022

Lending standards for business loans tightened during the third quarter of 2022, with weaker demand for commercial and industrial loans to firms of all sizes, according to the Federal Reserve’s senior loan officer opinion survey released today. Lenders also reported that standards for consumer loans tightened or remain unchanged during the survey period.

C&I. Significant net shares of banks (20%-50%) tightened standards on C&I loans to firms of all sizes. Tightening was most widely reported for premiums charged on riskier loans, costs of credit lines and spreads of loan rates over the cost of funds. Also, a significant net share of banks reported having tightened loan covenants to large and middle-market firms, while a moderate net share of banks (10%-20%) reported having tightened covenants to small firms.

CRE. On net, more than 50% of banks reported having tightened standards for construction and land development loans as well as for nonfarm nonresidential loans, while a significant net share reported having tightened standards for loans secured by multifamily properties. Meanwhile, significant net shares of banks reported weaker demand for all CRE loan categories.

Mortgages. Lending standards tightened or remained unchanged across all residential loan types and for HELOCs. Banks, on net, reported standards remained essentially unchanged for the following types of mortgages: non-qualified mortgage non-jumbo; government; conforming; and QM non-jumbo, non-conforming. However, a moderate net share tightened standards for subprime residential mortgages, while modest net shares (5%-10%) tightened standards for non-QM jumbo and QM jumbo residential mortgages, as well as for HELOCs.

Personal lending. Moderate net shares of banks reported tightening lending standards for credit card loans and other consumer loans, while standards for auto loans remained unchanged. For other consumer loans, modest net shares reported tightening the extent to which loans are granted to borrowers not meeting credit score criteria, widening spreads over the cost of funds, and increasing the minimum required credit score.