Federal Reserve Survey: Banks Tighten Lending Standards for Businesses in Second Quarter

Banks Tighten Lending Standards for Commercial Loans, Survey Indicates

WASHINGTON – A survey released by the Federal Reserve on Monday revealed that banks have tightened their lending standards for commercial and industrial loans during the second quarter.

Conversely, lending standards for households remained relatively stable compared to the previous quarter.

The survey indicated that the primary reasons cited by banks for tightening business loan standards included a less favorable or more uncertain economic outlook, specific industry challenges, and a decreased tolerance for risk. Conversely, banks that relaxed their standards attributed their actions to increased competition from other banks or nonbank lenders.

In the realm of residential real estate loans, there were notable shifts regarding loans eligible for purchase by government-sponsored enterprises and subprime mortgages. A moderate net fraction of banks reported having eased standards on loans eligible for government sponsorship, while another moderate net fraction indicated they had tightened standards on subprime residential mortgages.

The Federal Reserve’s survey, which focused on the second quarter, gathered responses from 71 domestic banks as well as 23 U.S. branches and agencies of foreign banks.