Fed survey: Business lending standards tightened in Q4 2023

Banks reported tighter standards and weaker demand for commercial and industrial loans to firms of all sizes over the fourth quarter of 2023, according to the Federal Reserve’s senior loan officer opinion survey released today. In addition, banks reported tighter standards and weaker demand for all commercial real estate loan categories, and tighter lending standards across all categories of residential real estate loans other than government residential mortgages and government-sponsored enterprise-eligible residential mortgages.

C&I. Moderate net shares of banks (10%-20%) reported having tightened standards on C&I loans to firms of all sizes. Banks also reported having tightened most queried terms on C&I loans to firms of all sizes over the fourth quarter. Tightening was most widely reported for premiums charged on riskier loans, spreads of loan rates over the cost of funds, costs of credit lines, and collateralization requirements, while significant (20%-50%) or moderate net shares of banks reported tightening most other terms on C&I loans to firms of all sizes.

CRE. Significant net shares of banks reported tightening standards for all types of CRE loans. Major net shares of banks (50% or more) reported weaker demand for loans secured by nonfarm nonresidential and multifamily residential properties, and a significant net share of banks reported weaker demand for construction and land development loans.

Mortgages. Banks reported having tightened lending standards for all categories of RRE loans and HELOCs, except government residential mortgages and GSE-eligible residential mortgages, for which standards remained basically unchanged. Moderate net shares of banks reported tightening standards for qualified mortgage and non-QM jumbo residential mortgages, HELOCs, non-QM non-jumbo residential mortgages, and QM non-jumbo non-GSE-eligible residential mortgages. A modest net share of banks (5%-10%) reported tightening standards for subprime residential mortgages.

Personal lending. Significant net shares of banks reported tightening lending standards for credit card and other consumer loans, while a modest net share of banks reported tighter standards for auto loans. Banks also reported tightening most queried terms on credit card loans. Specifically, moderate net shares of banks reported tightening credit limits, higher minimum required credit scores, wider interest rate spreads over the cost of funds, and tightening the extent to which loans are granted to some customers that do not meet credit-scoring thresholds.

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