By John Paul Rothenberg and Anaya Jhaveri
ABA DataBank
The Federal Reserve’s October 2025 Federal Reserve Senior Loan Officer Opinion Survey (covering the third quarter) shows a continuation of the split we highlighted last quarter: Large banks are generally easing standards and seeing strengthening demand, while other banks remain more cautious on standards and are only now seeing demand recover. (The SLOOS defines “large banks” as those with total domestic assets exceeding $100 billion as of June 30, 2025; all others are referred to as “other banks.” Each quarter, ABA’s Office of the Chief Economist provides in-depth analysis of the quarterly SLOOS that goes beyond the official summary release from the Fed.) The divergence is sharpest in commercial real estate and commercial and industrial lending, with a few exceptions in home equity and autos.
Focusing on commercial and industrial loans, this divergence is even more pronounced in loan terms and drivers, where large banks are easing aggressively on pricing and structure amid competitive pressures, while other banks remain structurally tighter despite improving demand.
Large banks
For large banks, as Figure 1 (left panel) illustrates, Q3 kept the broad Q2 pattern on standards as can be seen by the small to moderate arrow lengths which represent the shifts of net readings between quarters. C&I standards were basically unchanged, while most commercial real estate, residential real estate, or RRE, mortgages, and consumer credit categories eased on net (that is, most circles are on the right-hand side of the panel). In CRE, multifamily, construction and land development, and nonfarm nonresidential each registered modest-to-moderate (see the SLOOS definitions for these narrative descriptions) net easing in Q3. Across RRE, there was modest easing in most categories. The exception was home equity lines of credit, which shifted toward modest tightening after last quarter’s spike in demand.
For loan demand (Figure 1, right panel), the recovery broadened: the most notable shift was in C&I to large and middle market firms, which moved from weakening in Q2 to significant strengthening in Q3. CRE demand continued to improve, while RRE readings were mixed but generally strengthening. Even though HELOCs moderated from last quarter’s spike, demand remained strong. In consumer credit, demand for credit cards and other consumer loans accelerated, while auto cooled back to roughly neutral.
Figure 1.
Figure 1 explanation: This displays the net percentage of large bank responses from the SLOOS on a quarter over quarter basis. The left panel shows lending standards, and the right panel shows loan demand. Circles show the net readings for October 2025, while squares represent July 2025. Shape colors reflect the sign of the net response: red for negative (tighter or weaker), green for positive (looser or stronger), and grey for effectively no change. Arrows illustrate the change between quarters and are colored red for a negative shift, green for a positive shift, and gray for little to no change. The horizontal axis shows the net share of banks (in percent) reporting each outcome.
Other banks
Figure 2 (left panel) shows that other banks continued tightening standards in Q3, but to a lesser extent than in Q2, as shown by the small rightward shift in most net readings. The greatest caution remained in C&I, CRE and consumer credit cards. Consumer auto loans, “other” consumer loans (excluding autos and credit cards), and RRE linked loans generally moved from moderate tightening to neutral rather than outright easing.
The big positive change for other banks is that the demand picture (Figure 2, right panel) improved materially from last quarter’s broad-based weakness as can be seen by the large green arrows: 15 of 16 categories strengthened relative to Q2, and nine shifted from weakening to neutral or strengthening with particular improvement in residential real estate. Even so, CRE demand stayed negative for multi-family and construction and land development loans, and subprime mortgages and other consumer loans remained soft. An outlier was auto, which deteriorated from neutral to a significant net weakening of −28, the weakest demand reading in the Q3 survey.
Figure 2.
Figure 2 explanation: This displays the net percentage of other bank responses from the SLOOS on a quarter over quarter basis. The left panel shows lending standards, and the right panel shows loan demand. Circles show the net readings for October 2025, while squares represent July 2025. Shape colors reflect the sign of the net response: red for negative (tighter or weaker), green for positive (looser or stronger), and grey for effectively no change. Arrows illustrate the change between quarters and are colored red for a negative shift, green for a positive shift, and gray for little to no change. The horizontal axis shows the net share of banks (in percent) reporting each outcome.
Understanding the delta
Figure 3 underscores the persistent two-track cycle which compares the same loan categories between large and other banks in the most recent quarter as opposed to the cross-quarter comparison of the prior charts. On standards (Figure 3, left panel), other banks are still tighter or neutral where large banks are easing, as indicated by the red arrows, with the widest gaps in CRE. HELOCs were the only category where other banks show modest easing while large banks tightened slightly.
On the demand side (Figure 3, right panel), large banks see stronger demand across most categories, especially C&I, CRE, and consumer lending. RRE readings are more balanced and in several mortgage buckets other banks are as, or slightly more, positive than large banks. Auto demand remains a standout weakness for all banks where both saw deterioration quarter-over-quarter, with other banks seeing a more negative change and current net reading compared to large banks.
Figure 3.
Figure 3 explanation: This chart displays the net percentage of large and other bank responses from the SLOOS for October 2025. The left panel shows lending standards, and the right panel shows loan demand. Circles show the net readings for large banks, while squares represent other banks. Shape colors reflect the sign of the net response: red for negative (tighter or weaker), green for positive (looser or stronger), and black for near zero. Arrows illustrate the difference between cohorts and are red when other banks are more negative, green when other banks are more positive, or gray for little to no difference. The horizontal axis shows the net share of banks (in percent) reporting each outcome.
C&I loans deep dive
Terms
The October SLOOS reading on C&I loan terms shows there is even more divergence between large and other banks than the differences in net values on C&I standards in Figure 3 would suggest. The picture that emerges is of large banks accelerating easing on both pricing and structure, while smaller banks are only cautiously backing away from last quarter’s tightest terms.
The side-by-side comparison between cohorts in October in Figure 4 underscores the tightness of other banks compared to large banks, with seven out of eight terms showing red arrows. Large banks are meaningfully looser than other banks across most dimensions, especially on maximum credit-line size (+43 at large vs. −5 at other banks) and loan covenants (+30 vs. −8), with a sizable gap in interest rate spreads as well (+29 vs. +10). While collateral requirements, risk premiums, and maximum maturity are roughly aligned across cohorts. Taken together with the demand rebound discussed earlier, the Q3 term shifts suggest that large banks are competing more aggressively for C&I relationships—offering larger lines, lighter covenants, and tighter spreads—while other banks are mainly adjusting price at the margin but have yet to reopen line sizes or relax covenants, leaving effective credit availability comparatively tighter for their customers.
Figure 4.
Figure 4 explanation: This chart compares the percentage of banks changing loan terms for C&I loans to large and middle market firms for Large and Other banks in the latest survey using a combination of barbell and divergent bar charts. Each arrowed line (“barbell”) connects the net respondent percent for large banks (black dot) and other banks (blue dot) for Q3 2025, showing differences in each term between bank cohorts. Arrows illustrate the difference between cohorts and are red when other banks are more negative or green when other banks are more positive. The categories are sorted from the most net negative category to the most net positive for other banks. The shaded bars display the distribution of responses for large banks above the arrow, and other banks below the arrow: dark red/green indicate “considerable” changes in tightening/easing, while lighter shades show “somewhat.” Neutral responses are not shown.
Drivers for Standards
The drivers for changing C&I standards in October reinforce the same two-track story. Large banks are loosening standards on the back of competition, stronger capital, and a more constructive macro view. Conversely, other banks reported increased pessimism anchored by macro uncertainty, risk appetite, and sector-specific concerns, with new concerns around capital and liquidity.
The side-by-side October snapshot in Figure 5 underscores how far the cohorts have diverged. Red arrows show up for every driver, especially economic outlook, industry-specific problems, and risk tolerance, signaling other banks relative pessimism. The widest gap is competition (about +80 percent at large banks versus +12 percent at others), highlighting strong competitive pressure at the largest institutions that smaller banks are not feeling to the same degree.
Figure 5.
Figure 5 explanation: This chart compares the percentage of banks citing drivers for changing loan terms for C&I loans for large and other banks in the latest survey using a combination of barbell and divergent bar charts. Each arrowed line (“barbell”) connects the net respondent percent for large banks (black dot) and other banks (blue dot) for Q3 2025, showing differences in each driver. Arrows illustrate the difference between cohorts and are red when other banks are more negative or green when other banks are more positive. The categories are sorted from the most net negative category to the most net positive for other banks. The shaded bars behind each barbell display the distribution of responses for large banks above the arrow, and other banks below the arrow: dark red/green indicate “very important” drivers for tightening/easing, while lighter shades show “somewhat important.” Neutral responses are not shown.
Drivers for demand
C&I demand drivers turned decisively more positive in Q3 compared to Q2, but the rebound remains uneven across bank cohorts. As Figure 6 illustrates, large banks are seeing a faster and broader recovery in near-term operating and capital spending needs, while other banks are improving from a much weaker starting point and remain more concentrated in relationship-driven activity.
More large banks reported stronger demand across core working-capital and capex drivers, as highlighted by the red arrows in accounts receivable financing, inventory financing, and investment in plant and equipment, consistent with a more robust pickup in day-to-day borrowing and longer-horizon spending among their customers. Other banks, by contrast, are more optimistic in two areas: M&A and competition (shifts to and from banks and nonbanks), pointing to the re-emergence of deal-related demand and presumably less competitive pressure from alternative financing relative to large banks. Overall, the recovery in C&I demand is broadening across the system, but large banks are leading on operating and capex needs, while other banks’ relative strength remains concentrated in M&A and relationship channels.
Figure 6.
Figure 6 explanation: This chart compares the percent of banks citing drivers for changes in demand for C&I loans for Large and Other banks using a combination of barbell and divergent bar charts. Each arrowed line (“barbell”) connects the net respondent percent for large banks (black dot) and other banks (blue dot) for Q3 2025, showing differences in each driver. Arrows illustrate the difference between cohorts and are red when other banks are more negative or green when other banks are more positive. The categories are sorted from the most net negative category to the most net positive for other banks. The shaded bars behind each barbell display the distribution of responses for large banks above the arrow, and other banks below the arrow: dark red/green indicate “very important” reasons for seeing weaker/stronger demand, while lighter shades show “somewhat important.” Neutral responses are not shown.
Conclusion
Taken together, the October SLOOS points to a continuation, but some moderation, of the two-track credit cycle. Large banks are easing standards across many products, seeing broadening demand, and competing more actively for relationships. Other banks remain comparatively cautious: standards are still firm in key areas, easing is slower and more selective and demand, while improved, continues to lag in segments such as CRE and autos. The underlying drivers remain distinct, with large banks citing competition, capital strength, and a more constructive macro view, while smaller banks continue to emphasize macro uncertainty, risk tolerance, and regulatory and balance-sheet constraints.
The C&I deep dive reinforces and sharpens this picture. For large banks, easing is broad-based across both price and structure — larger credit lines, looser covenants and narrower spreads — paired with a decisive rebound in demand driven by working-capital needs and capital expenditures. Other banks, by contrast, have mainly adjusted pricing at the margin while keeping structural terms tight, even as demand recovers from very weak levels. In effect, C&I credit availability is reopening fastest at large banks, while smaller banks remain constrained, leaving a meaningful gap in how quickly borrowers experience improving credit conditions across the banking system.
JP Rothenberg is VP of Banking and Policy Research at ABA. Anaya Jhaveri is a graduate student at Johns Hopkins University studying applied economics. Discover more in-depth research, dashboards, and webinars from the Office of the Chief Economist by exploring ABA’s Economic Research & Insights website.
