Lending standards for most business and consumer loans tightened during the fourth quarter of 2022, with weaker demand reported in almost every category, according to the Federal Reserve’s senior loan officer opinion survey released today. Banks also reported that they expected lending standards to tighten, demand to weaken and loan quality to deteriorate across all loan types in 2023.
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, spreads of loan rates over the cost of funds, and costs of credit lines. In addition, significant net shares of banks reported having tightened loan covenants and collateralization requirements to firms of all sizes. Moderate net shares of banks (10%-20%) reported having tightened the maximum size of credit lines to firms of all sizes.
CRE. Major net shares of banks (more than 50%) reported tightening standards for all types of CRE loans. Meanwhile, major net shares of banks reported weaker demand for loans secured by nonfarm nonresidential properties and construction and land development loans, and a significant net share of banks reported weaker demand for loans secured by multifamily properties.
Mortgages. Lending standards tightened or remained basically unchanged across all residential real estate loan types and for HELOCs. Moderate net shares of banks (5%-10%) reported tightening standards for jumbo and subprime residential mortgages, while modest net shares reported tighter standards on HELOCs, qualified mortgage non-jumbo non-GSE-eligible mortgages, and non-QM non-jumbo mortgages. In contrast, standards remained basically unchanged for GSE-eligible and government residential mortgages.
Personal lending. A significant net share of banks reported tightening lending standards for credit card loans, while moderate net shares of banks reported tighter standards for auto and other consumer loans. Moderate net shares of banks reported higher minimum credit score requirements as well as tightening both credit limits and the extent to which loans are granted to some customers that do not meet credit-scoring thresholds. Similarly, banks reported tightening most queried terms on auto loans, on net. For other consumer loans, modest net shares of banks reported widening spreads over the cost of funds, increasing the minimum required credit score, and tightening the extent to which loans are granted to borrowers not meeting credit score criteria.