Fed: Large Banks Ease Lending Standards, Small Banks Still Struggling

Banks have eased somewhat lending standards for small businesses for the first time in nearly four years, the Federal Reserve said Monday. In its quarterly Senior Loan Officer Survey, which is based on responses from 57 domestic banks and 23 U.S. branches and agencies of foreign banks, the Central Bank found that tight lending conditions were starting to ease. But that was mostly concentrated at big financial institutions, while smaller banks continued to struggle.

From the Federal Reserve:

“The July survey indicated that, on net, banks had eased standards and terms over the previous three months on loans in some categories, particularly those categories affected by competitive pressures from other banks or from nonbank lenders. While the survey results suggest that lending conditions are beginning to ease, the improvement to date has been concentrated at large domestic banks. Most banks reported that demand for business and consumer loans was about unchanged.

On residential real estate. “On net, a small fraction of domestic banks reported having eased standards on prime residential mortgage loans; the few respondents that had eased standards were all large banks. The increase in demand over the past few months for prime residential mortgage loans reported by several respondents to the current survey marked a reversal of the net weakening of demand for such loans reported in the April survey. Fewer than one-half of survey respondents indicated that their bank originated nontraditional mortgage loans.”

[emphasis added]

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