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Bank Lending Standards

Around 10% of US banks eased their lending standards for businesses of all sizes, while more than 80% leave them unchanged, leading to a further modest easing in credit conditions for U.S. businesses notwithstanding the Fed hiking cycle.

According to the Senior Loan Officer Opinion Survey on Bank Lending Practices released on the 6th of August by the Federal Reserve, during the second quarter of 2018 banks reported modest easing in lending standards for commercial and industrial loans, and slightly stronger demand for loans, which bodes well for our outlook in increase in business spending and capex. Moderately weaker demand for residential loans is instead in line with somewhat weaker housing outlook, as seen in recent data. Demand for other consumer loans remains little changed, in line with our expectations of stable outlook for personal consumption expenditure this year.

On the loans to business side, the surveys shows:

Supply:  banks eased their standards and terms for commercial and industrial (C&I) loans to firms of all sizes while kept commercial real estate lending standards basically unchanged.

Demand: banks reported stronger demand for C&I loans by small firms and weaker demand for commercial real estate loans.

From a longer-term perspective ( from 2005 to present), surveyed banks reported on net that their levels of lending standards on C&I loans are currently easier while their levels of lending standards for CRE loans are relatively tight.

Graph 1

Loans to households:

Supply: banks reported that their lending standards on residential real estate loans and auto loans changed only a little, while onlyamoderate share of banks tightened standards on credit card loans

Demand: banks reported weaker demand for all categories of residential real estate loans, while demand for consumer loans remained little changed.

From a longer-term perspective(from 2005 to present) banks reported on net that tighter lending standards of residential real estate and subprime consumer lending standards

Graph 2
USARDI Annalisa , CFA, Senior Economist
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Bank Lending Standards
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