Fed Survey Shows ‘Widespread’ Easing of C&I Loan Standards
The Federal Reserve’s October 2012 Senior Loan Officer Opinion Survey on Bank Lending Practices indicated that larger fractions of domestic banks have eased C&I loan terms and that the easing was somewhat more widespread than reported in the July survey. The survey summary is based on responses from 68 domestic banks and 23 U.S. branches and agencies of foreign banks.
Slightly less than 10% of domestic survey respondents indicated that their C&I lending standards to large and middle-market firms and to small firms eased over the past three months on balance. However, larger fractions of domestic banks reported having eased many C&I loan terms to borrowers of all sizes. For most of those terms, the easing was somewhat more widespread than it was reported to have been in the July survey. Of the respondents that reported having eased either standards or terms over the past three months, almost all cited more-aggressive competition from other banks or nonbank lenders as an important reason for doing so. As in the previous survey, no other reasons were broadly cited as important.
The survey indicated that on balance, C&I loan demand changed little over the past three months. In contrast to the July survey, in which a small margin of banks indicated that demand from large and middle-market firms had strengthened on balance, in response to the current survey a very small net fraction of respondents indicated that demand from such firms had weakened. On net, demand from small firms was reportedly about unchanged, as it had been in the previous survey.
On balance, branches and agencies of foreign banks reported that their C&I lending standards had remained about the same over the past three months, while positive fractions of banks reported easing on some loan terms. As was true for domestic respondents, the most widely cited reason for easing standards or terms among branches or agencies was more-aggressive competition from other lenders. Although a notable fraction of such institutions reported a weakening of C&I loan demand in the July survey, the balance of foreign respondents reported little change in demand for such loans over the past three months.
To read the full survey report click here.