Economic Report: Banks Have Eased Lending Terms For Business Clients This Year, Fed Survey Finds

Author photo

By

Senior economics reporter

A moderate net fraction of banks tightened standards on credit cards in the first quarter, the Fed survey found.

The numbers: Banks eased lending terms for large and mid-sized commercial borrowers in the first three months of the year, according to a Federal Reserve survey of senior loan officers released Monday. Standards on most business loans remained unchanged.

What happened: The less uncertain economic outlook in the first quarter was one reason behind the easing of lending terms, the loan officers said. The severe market selloff in the fourth quarter had led to some caution about lending.

The survey also found that banks continued to tighten across all three major categories of commercial loans.

And a moderate net fraction of banks also tightened standards for consumer credit-card loans. Lending standards on automobile loans and most categories of residential real estate remained basically unchanged.

Big picture: Each quarter, the Fed surveys 73 domestic banks and 21 foreign banks to assess whether credit, which is the lubricant of the economy, is becoming scarce or remains plentiful. Economists like to focus on bank standards because demand for loans can be volatile.

The data shows that despite Federal Reserve moves to raise interest rates over the past few years, credit conditions remain accommodative. Worries of a downturn in the credit cycle are overblown, economists said.

What are they saying? “Banks are facing a mediocre lending environment. To get new business in the commercial sector, banks are having to ease standards. At the same time, they are not aggressively tightening standards in other sectors, instead taking a wait-and-see approach,” said Scott Anderson, chief economist at Bank of the West.

Market reaction: After opening sharply lower Monday on fears of a U.S. -China trade war, the Dow Jones Industrial Average DJIA, -0.25% moved steadily higher throughout the trading session and closed down about 0.3%, well above session lows.

RECENT NEWS

Navigating New Horizons: The Entry Of Crypto-ETNs In The UK Market And Its Ripple Effects

In an unprecedented move that marks a significant pivot in the United Kingdom's regulatory approach to digital assets, t... Read more

Navigating The New Frontier: Investing In The Age Of Artificial Intelligence

In recent months, the financial world has witnessed a phenomenon that has reshaped the landscape of investment: the boom... Read more

The Future Of Finance: How Cryptocurrency ETFs Are Changing The Investment Landscape

In an unprecedented move that marked a milestone for the digital currency world, the U.S. Securities and Exchange Commis... Read more

Financial Markets Embark On A Resilient Path Amidst Macro-Economic Optimism

Author: Brett Hurll                            &nb... Read more

Nikkei Takes Hit From Japans Vigorous Yen Verbal Intervention, But Yens Gain Lacks Strength

Nikkei tumbled sharply in Asian session today, largely in response to Yen’s rebound late yesterday, which followed s... Read more

Japans Financial Leaders Unite In Defense Of The Yen, Sparking Rebound

Japanese Yen staged in a notable rebound in European session, triggered by heightened market vigilance towards market ... Read more