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Monday, November 2, 2015

C&I Lending Standards Little Changed as Demand Flattens

Over the past three months, banks reported easing lending standards and weaker demand for a variety of home loan types. Lending standards for C&I and CRE loans were largely unchanged as demand remained flat in the third quarter, according to the October Federal Reserve Senior Loan Officer Opinion Survey.

Although the majority of banks did not change their lending standards, a net 7.3 percent of banks reported tightening standards for commercial and industrial lending to large and middle market firms, while a net 1.4 percent reported tightening standards for small business lending. Most respondents who tightened standards for C&I loans cited a less favorable or more uncertain economic outlook, as well as worsening of industry-specific problems. Some banks also attributed tightening to a reduced risk tolerance and decreased activity in the secondary market for loans. The few banks which eased lending standards cited aggressive competition from banks and nonbank lenders as their reason for doing so.

A modest net fraction of banks eased underwriting standards on mortgages eligible for purchase by government sponsored enterprises, and on qualified mortgage loans. However, modest net fractions of banks reported weaker demand across most categories of mortgages.

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