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Banking

Fed Survey: Banks Ease Lending Standards amid Competition

bankU.S. banks eased their lending standards and saw stronger demand for loans in most categories during the second quarter of 2013, according to the Federal Reserve's July Senior Loan Officer Opinion Survey on Bank Lending Practices.

Increasing competition behind easing
Responses from 73 domestic banks and 22 U.S. branches and agencies of foreign banks indicated that the institutions eased their lending policies for commercial and industrial (C&I) and commercial real estate (CRE) loans, as they saw stronger demand for those credits. Most banks that eased C&I lending policies said they did so because of increased competition. On net, respondents reported stronger demand for C&I loans over the second quarter, although a few large banks indicated that demand had weakened.

The July survey included special questions about changes in standards and demand over the past year for three categories of CRE loans: construction and land development loans; loans secured by nonfarm, nonresidential properties; and loans secured by multifamily residential properties. Banks reported eased standards and increased demand for all three of those CRE categories.

On the household side, banks also reported they eased standards and terms on some categories of loans. Modest net fractions of respondents reported having eased standards on prime residential or nontraditional mortgage loans, and a large net fraction indicated that they saw increased demand for prime mortgage loans. Demand for mortgages, auto loans, and credit loans all reportedly strengthened, on balance, over the second quarter.

The Federal Reserve conducts the loan officer survey quarterly to track supply and demand in the market for bank loans.

August 29, 2013

 

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