WASHINGTON–A new survey of senior loan officers released by the Fed has found banks tightening standards across all lending types.
The July 2020 Senior Loan Officer Opinion Survey on Bank Lending Practices, which probes for changes in the standards and terms on, and demand for, bank loans to businesses and households over the past three months, found that, on balance:
- Banks tightened their standards and terms on commercial and industrial (C&I) loans to firms of all sizes and reported weaker demand for C&I loans from firms of all sizes.
- Banks tightened standards and reported weaker demand across all three major commercial real estate (CRE) loan categories—construction and land development loans, nonfarm nonresidential loans, and multifamily loans—over the second quarter of 2020.
- For loans to households, banks tightened standards across all categories of residential real estate (RRE) loans and across all three consumer loan categories—credit card loans, auto loans, and other consumer loans—over the second quarter of 2020 on net. Banks reported stronger demand for all categories of RRE loans and weaker demand for all categories of consumer loans, the Fed said.
Additional Findings
The Fed reported banks also responded to a set of special questions inquiring about the current level of lending standards relative to the midpoint of the range over which banks’ standards have varied since 2005. Banks, on balance, reported that their lending standards across all loan categories are currently at the tighter end of the range of standards between 2005 and the present, the survey found.
In terms of residential real estate lending, the survey found over the second quarter major net shares of banks tightened standards for all RRE loan categories except for subprime residential mortgage loans, for which a significant net fraction of banks reportedly tightened lending standards.
“Regarding demand for RRE loans over the second quarter, a major net share of banks reported having experienced stronger demand for GSE-eligible residential mortgages, and significant net shares of banks reported having experienced stronger demand for most of the remaining categories of RRE loans,” the Fed said in announcing the results.
Demand was reportedly weaker only for home equity lines of credit (HELOCs).
More on Consumer Lending
On consumer lending, over the second quarter major net shares of banks tightened lending standards on all categories of consumer loans. Major net fractions of banks also tightened important terms on credit card loans, including credit limits and minimum credit scores required. In contrast, a modest net share of banks reportedly reduced the minimum percent of outstanding balances required to be repaid each month. Meanwhile, significant net shares of banks tightened most surveyed terms on auto loans, the Fed reported.