The Office of the Comptroller of the Currency released its 18th annual credit underwriting survey. The results of this year’s survey showed that underwriting standards remained largely unchanged from last year, although some easing was noted within certain commercial and retail products. OCC examiners reported that national banks and FSAs (collectively, banks) that eased standards generally did so in response to changes in economic outlook, the competitive environment, and the bank’s risk appetite, including a desire for growth. Large banks reported the highest share of eased underwriting standards.
Loan portfolios that experienced the most easing in underwriting standards include indirect consumer, credit cards, large corporate, asset-based lending, and leveraged loans. Loan portfolios that experienced the most tightening in underwriting since last year include HLTV home equity, international, commercial and residential construction, affordable housing, and residential real estate loans.
As in the past, the economy’s health was a major factor influencing changes in underwriting standards. Expectations regarding the future health of the economy, however, differ by bank and loan product as examiners reported that economic outlook was one of the main reasons given for easing or tightening underwriting standards. Other factors influencing tighter underwriting standards were changes in risk appetite and product performance. Factors contributing to eased standards were changes in the competitive environment, increased competition and desire for growth, and increased market liquidity.
The tightening previously seen in small business banking underwriting practices has decreased with 82 percent of banks now reporting unchanged standards from the last survey. The level of credit risk in small business loans remained stable, and is expected to remain so over the next 12 months.
Read the OCC report.