August 24, 2014

Fed: Biz-loan standards eased but have a way to go

Banks reported some easing in commercial lending standards over the past three months in a recent Federal Reserve survey of senior loan officers, but the Fed points out that this easing occurred against the backdrop of quantitative easing.

The survey included responses from 75 domestic banks and 23 U.S. branches of foreign banks. While no credit unions are included, the Fed's report is the most widely cited gauge of lending standards, says NAFCU Senior Economist Curt Long.

Long said the Fed's commentary indicated that commercial loan terms are still not where they were prior to the financial crisis. "So while lending standards and loan demand continue to trend in the right direction, the Fed remains confident that more needs to be done and that their accommodative monetary policy is appropriate for the time being," Long said.

The recent findings are consistent with each of the past three surveys, the Fed said, and includes responses from large and middle market firms and small firms.

Among key findings reported Monday by the Fed:

  • Competition, followed by a more favorable economic outlook and stronger loan demand were the reasons for easing cited most frequently.
  • Standards for prime residential real estate lending have eased but were unchanged for home equity lines of credit. Respondents cited stronger demand for both first mortgages and HELOCs.
  • There was a "slight" easing of credit standards for consumer installment and credit card loans. Stronger demand was reported for credit card, auto and other consumer loans.

The survey report is based on responses received from July 1-15 covering the most recent three-month period.