Last week, the Federal Reserve released its quarterly Senior Loan Officer Opinion Survey on Bank Lending Practices. In general, credit standards held fairly stable over the period for C&I loans, commercial real estate and residential mortgage loans, while demand for all three types of loans showed some deterioration.
Credit standards for approving C&I loans were little changed from April, with 80% of large banks reporting that standards were basically unchanged. This was the same percentage reported in the April report. There was a slight increase to 5.7% from 0%, however, in banks that had tightened standards somewhat. At the same time, the terms of the loans, including maximum size and maturity, costs of the credit line, loan premiums, were tightened slightly. One factor - spreads of loan rates over the bank's cost of funds - was eased slightly from April. The primary reasons given for tightening credit standards was a less favorable or uncertain economic environment and reduced tolerance for risk.