August 04, 2021

Fed survey: Banks ease lending standards as loan demand returns

FedThe Federal Reserve's second-quarter senior loan officer opinion survey (SLOOS) revealed that banks have eased lending standards in several areas following a year-long trend of tightening due to the coronavirus pandemic.

"Credit constraints are easing, indicating that lenders' optimism matches that of consumers," said NAFCU Chief Economist and Vice President of Research Curt Long. "Although the survey was conducted before COVID cases began to rise in the U.S., increasing vaccination rates and the experience of other Western nations with earlier exposure to the delta variant provide reasons for optimism."

Here's a look at some key findings from the first-quarter survey:

  • regarding loans to businesses, respondents to the July survey, on balance, reported easier standards and stronger demand for commercial and industrial loans to firms of all sizes over the second quarter;
  • for commercial real estate (CRE), standards on multifamily and construction and land development loans eased, while standards on loans secured by nonfarm nonresidential properties remained basically unchanged;
  • banks reported stronger demand for all CRE loan categories;
  • for loans to households, banks eased standards across most categories of residential real estate (RRE) loans, on net, and reported stronger demand for most types of RRE loans over the second quarter;
  • over the second quarter, a significant net share of banks eased standards for credit card loans, and a moderate net share of banks eased standards for auto loans and for other consumer loans; and
  • regarding demand for consumer loans, significant net shares of banks reported stronger demand for auto and credit card loans, and a modest net share of banks reported stronger demand for other consumer loans.

The latest edition of the survey also included a set of special questions inquiring about the current level of lending standards relative to the midpoint of the range over which banks' standards have carried since 2005.

This senior loan officer survey was based on responses from 75 domestic banks and 22 U.S. branches and agencies of foreign banks.

Access the full survey from the Fed. See NAFCU's recent economic analysis reports here.