Fed Survey Shows Tightened Bank Lending Standards in 2008
Consumers and businesses had a harder time obtaining credit in the fourth quarter of 2008 as banks reported tightening lending policies, according to the January 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices conducted by the Federal Reserve Board.
Commercial, industrial loans see tightening
Nearly 70 percent of domestic survey respondents said they had tightened standards on C&I loans to small firms, a figure that was only slightly lower than that found in the October survey. Most respondents reported having charged premiums on riskier loans and increasing the cost of credit lines to firms of all size during the survey period.
On balance, about 80 percent of domestic banks reported they had tightened their lending standards on commercial real estate loans in the last quarter of 2008, down slightly from the roughly 85 percent that reported doing so in the October 2008 survey.
Uncertain outlook a key factor in tightening
Banks that experienced weaker loan demand cited decreases in their customers' needs to finance aspects of their business such as investment in plants and equipment, mergers and acquisitions, and inventory.
Residential real estate lending also feels the squeeze
About 10 percent of domestic respondents saw weaker net demand for prime residential mortgage loans over the survey period, significantly down from the roughly 50 percent that reported weaker demand in the October survey.
February 19, 2009