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Banks continued to ease lending standards over the first quarter due in part to increased competition and a less uncertain economic outlook, a Fed survey found Monday.
May 2 -
Lenders, polled during the last three months of 2010, predicted stabilization this year in the quality of asset classes that in prior surveys had elicited groans.
January 31
WASHINGTON — Lending standards are tighter for most types of business and consumer loans than at any time since 2005, according to a survey released Monday by the Federal Reserve Board.
In the July senior loan officer survey, respondents were asked to describe the lending standards at their bank for several loan categories, including commercial and industrial loans, residential real estate loans, and consumer loans. Loan officers then compared how their current lending standards faired to the range defined by the easiest and tightest standards applied by their bank since 2005.
"Significant factions of respondents … indicated that, for most loan categories, the current level of lending standards was tighter than the middle of its recent historical range, though the reported degrees of tightness varied noticeably across categories," the Fed said.
While the periodic survey always charts the tightening and easing of lending standards during the previous few weeks, it has seldom tried to put those results in a broader context by comparing them to recent history. The so-called "special questions" in the Fed survey released Monday attempted to do just that, and shed light on areas that may have seen some easing but nonetheless remain tight overall, and others where easier standards appear to be broader in nature.
For example, standards for syndicated loans to investment-grade firms appear largely stable, with most respondents, or 42%, saying they were "middle of the range" since 2005. Roughly 30% of respondents, meanwhile, said standards for such loans were tighter than the historical average, while 28% said they were easier.
The situation was different for C&I loans to firms below investment-grade. Only 26.5% of respondents said standards were "middle of the range," while 49% said standards were tighter or the tightest they've ever been. Approximately 24% said standards were slightly easier on such loans.
"For different types of C&I loans, between 25% and 50% of domestic respondents indicated that their bank's current lending standards were near the middle of that range," according to the Fed's survey.
For non-syndicated C&I loans to large and middle-market firms, 42.6% said standards were in the middle of the range, 24% said they were somewhat easier, and 33% said they were tighter. For loans to smaller companies, 47.1% reported that standards were in the middle, while more than 17% said they were easier and 35% said they were tighter.
The Fed's survey also found that standards for all types of commercial real estate lending remained tight when compared to the range that had prevailed at most banks since 2005.
"Indeed, roughly 75% of domestic respondents indicated that their bank's standards for construction and land development loans were tighter than the middle of the range that these standards have occupied since 2005, with nearly one-third of banks stating that standards on CLD loans were currently at their tightest level seen over this period," the Fed said in its survey.
For CRE loans that were used for nonfarm residential purposes, 37% of those surveyed said standards were significantly tighter than the norm, but not quite the tightest they've been since 2005. Nearly 15% said such loans were the tightest they've ever been.
"While fewer banks indicated that standards were at their tightest levels for nonfarm residential CRE loans and for multifamily CRE loans, a majority of domestic respondents noted that their current level of standard was tighter than the middle of its recent historical range for these lending categories as well," the Fed said.
Separately, loan officers at 16 out of 51 banks reported that standards for residential mortgages under the conforming loan limit remained in the middle of the range, while 5 said that standards were somewhat easier. Most banks, however, saw tighter standards. Eleven banks said standards were tighter than the middle, but easier than they had been. Thirteen banks said such standards were slightly easier than their tightest levels, while 6 banks said they were still at their tightest levels.
On such loans with principal balances greater than the conforming loan limit, 66% of banks said that standards were tighter, while 23% said they were at the middle of the range, and nearly 10% said they were slightly easier.
On consumer lending, 19 out of the 34 institutions surveyed said that credit card lending was at the tighter end of the scale, while 12 said it was in the middle of the range, and 3 said it was slightly easier.
That rang true for auto loans, too, with 44.7% of banks saying it was at the middle of the range while 36% said it was tighter and 19% said it was somewhat easier.
