Overall, banks reported having ceased tightening of lending standards, though they are not unwinding the tightening that ensued over the last two years. Larger banks (those with over 20 billion dollars in assets) reported easing credit terms for large and mid-sized firms. The attributed this loosening to increased competition from bank and nonbank lenders as well as an improving economic environment. Meanwhile, smaller banks on average reported reduced lending to all varieties of borrowers. Demand for loans from both businesses and households declined in the fourth quarter.
The exception to the loosening trend in the fourth quarter was commercial real estate. Banks expect rising delinquency rates in commercial real estate in the near future, as well as declining demand for loans among prime borrowers.
Most banks reported increased willingness to make consumer installment loans for the first time in close to three years. However, they reported declining demand for consumer credit. Banks also reported having reduced the credit limits on may credit cards, as well as having reduced new credit card issuances.
Garrett W. McIntyre
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