As Competition Rises, Some Banks Easing Standards for Business Loans
In the first quarter of 2013 U.S. banks eased lending standards and saw stronger demand for loans in several categories, according to the Federal Reserve's April Senior Loan Officer Opinion Survey on Bank Lending Practices.
Increasing competition behind easing
Responses from 68 domestic banks and 21 U.S. branches and agencies of foreign banks indicated that business lending policies eased and demand increased, on the whole. In particular, all the respondents indicated they had not changed or "eased somewhat" their standards for making commercial and industrial (C&I) loans. Banks that eased their C&I lending policies generally said they did so because of increased competition for such loans. Demand for C&I loans also reportedly increased, but such reports were less widespread than in the previous survey.
On the household side, the results were more mixed. Overall, a few domestic banks said they made prime residential mortgages a bit easier to secure. For the fifth consecutive survey, respondents reported that demand for prime residential mortgage loans had strengthened on net.
Terms on many loans unchanged
A small net fraction of respondents reported that they had eased standards on credit card and auto loans over the past three months while standards on other consumer loans had remained basically the same. On balance, banks reported having eased selected terms on auto loans, but terms on credit card and other consumer loans were reportedly little changed. Demand for credit card and auto loans had strengthened, on the whole, and demand for other consumer loans was essentially stable.
The Federal Reserve conducts the loan officer survey quarterly to track supply and demand in the market for bank loans.
May 22, 2013