The latest Senior Loan Officer Opinion Survey on Bank
Lending Practices (SLOOS), published by the Federal Reserve, provides a
comprehensive snapshot of ongoing changes in lending dynamics over the three
months prior to its completion in October, mainly reflecting developments
within the third quarter. The survey results reflect a cautious lending
landscape, characterized by tightened standards across various loan categories.
Senior lending professionals representing as many as 80
large domestic banks and 24 U.S. branches and agencies of foreign banks were
asked to offer feedback about standards and terms, as well as the demand for
loans to businesses and households.
Residential Real Estate (RRE) loans: Lending
standards for all RRE loan categories, except government residential mortgages,
saw some degree of tightening, the results indicate. The respondents noted weaker
demand for most RRE loans, with significant net shares reporting declining
demand for government residential mortgages and home equity lines of credit
(HELOCs).
Consumer loans: A significant net share of respondents
representing banks reported tightened lending standards for credit cards and
other consumer loans, with a moderate net share also noting tightening auto
loan standards. This development coincided with weaker demand across all
consumer loan categories.
Credit approval policies: Banks reported being less
likely to approve credit card and auto loan applications for borrowers with
FICO scores between 620 and 680. Conversely, a modest net share of banks
reported being more likely to approve credit card applications from borrowers
with FICO scores of 720 or above.
Reasons for changing standards: The most frequently
cited reasons for tightening lending standards across all loan categories
included a less favorable economic outlook, reduced risk tolerance,
deterioration in credit quality, funding cost concerns, as well as concerns
about legislative changes. Banks that eased standards cited an improved
economic outlook and enhanced credit quality.
Commercial and industrial (C&I) loans: Survey
respondents reported tightened standards for C&I loans to firms of all
sizes during the third quarter. This tightening was most notable for riskier
loans, loan rate spreads and credit line costs. Large banks exhibited less
tightening compared with their counterparts. Reasons cited for these changes
included a less favorable economic outlook, reduced risk tolerance and
diminished competition.
Commercial real estate (CRE) loans: Across the board,
banks reported tightened standards for all CRE loan categories. Large banks
reported less tightening than other banks. Respondents also observed weaker
demand for all CRE loan categories, particularly among large banks. Foreign
banks also reported tighter standards but with a moderate net share reporting
stronger demand.