Banking

Fewer banks eased standards and terms on loans to businesses in the third quarter, according to a Federal Reserve survey released November 7, 2011. The quarterly poll of senior loan officers includes 51 domestic banks and 22 U.S. branches of foreign banks.

Marking a change from previous quarters, a small share of domestic banks reported easing standards on commercial and industrial (C&I) loans, especially those to midsized and large firms. In contrast, foreign banks, which primarily lend to large firms, reported tightening standards on such loans. According to the survey, conducted in early October, banks cited a less favorable or more uncertain economic outlook as a reason for tightening standards on C&I loans.

Banks tighten standards on loans to Europe
A set of special questions about banks' lending to their European counterparts highlighted ongoing concerns related to the region's debt crisis. About half of domestic banks and two-thirds of foreign banks reported lending to European banks. Of them, roughly two-thirds said that they tightened their standards on such loans. For many banks, the degree of tightening was "considerable," the report said. 

Stronger demand for mortgage, consumer loans
Domestic banks reported little change in their standards for commercial real estate (CRE) loans since the previous quarter, when they were widely described as being "at or near their tightest standards since 2005." In contrast, a large share of foreign banks reported tightening standards on such loans. Demand for CRE loans was reportedly stronger, although less so than in the two previous quarters, according to the survey.

For the first time since early 2010, a greater share of banks reported stronger demand for mortgage loans than those citing weaker demand, "perhaps reflecting refinancing activity," the Fed noted. Similar to previous surveys, few banks reported relaxing their standards on such loans.

However, a number of banks eased standards on various consumer loans, including credit card loans. Banks also reported relaxing standards for auto loans. At the same time, a small number of banks cited stronger demand for credit card and auto loans, while changes in demand for other types of consumer loans were mixed.

November 29, 2011