A Federal Reserve Board survey of senior loan officers on bank lending practices found that, over the last three months, credit standards for approving applications for commercial and industrial (C&I) loans or credit lines have eased in many cases. Of the 73 banks surveyed, many stated that they generally anticipated improvements in the performance of most loan types this year.
The survey found that credit standards had remained largely the same, with 89% of respondents saying standards remained unchanged for large and middle-market firms (annual sales of $50 million or more) and 91.4% saying standards were unchanged for small firms (annual sales of less than $50 million). 8.2% of respondents said standards were eased somewhat for large and middle-market firms, while 7.1% said their banks eased standards on small firms. Only 2.7% of respondents (two banks) said that they had tightened standards somewhat on large firms, while just 1.4% (one bank) said it had tightened credit standards for small firms.
With regards to the terms of C&I loans, the survey found that most banks’ policies remained either unchanged, or had eased. For the spreads of loan rates over the banks’ cost of funds for large and middle-market firms, 50.7% reported no change to terms, while 42.5% said terms were eased somewhat and 6.8% said they were tightened somewhat. For small firms 58.6% of banks reported no change, 38.6% reported terms easing somewhat and 2.9% reported terms tightening somewhat.
69% of respondents said their bank’s practice regarding interest rate floors remained unchanged for large and middle-market firms, while 15.5% said it had eased terms somewhat and 11.3% saying they had eased considerably. 4.2% of respondents said their terms had tightened somewhat. For small firms, 68.2% said their terms remained unchanged, 21.2% said they had eased somewhat and 6.1% said they had eased considerably. 4.5% of respondent said their terms for small firms had tightened somewhat.
The other indicators used for the survey followed the same pattern, with the majority of banks saying their terms were unchanged, with a large portion, sometimes 25% or more, saying they had eased terms and a minority saying they had tightened their terms.
The note released with the survey by the Federal Reserve Board noted that of those respondents who said their bank was tightening policies, some pointed towards their concerns about the oil and gas to explain the change.
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