Lending standards for business loans eased at U.S. banks in the first quarter of the year, according to a new report from the Federal Reserve. Consumer lending, though, experienced tightening standards.
Loan officers surveyed for the report said they had “eased their standards and terms on commercial and industrial (C&I) loans to large and middle-market firms and left their standards unchanged for small firms,” according to the Federal Reserve.
“Meanwhile, banks eased standards on nonfarm nonresidential loans and tightened standards on multifamily loans, whereas standards on construction and land development loans were little changed. Demand for C&I and for commercial real estate loans (CRE) reportedly weakened.”
The central bank arrived at its findings via responses from 72 domestic banks and 22 U.S. branches and agencies of foreign banks, the report said.
The report went on to describe other changes in the early part of 2018 in the bank lending industry, and highlighted the role competition had played.
“Banks reportedly eased important lending terms, including maximum loan size and the spread of loan rates over their cost of funds, across all three major CRE loan categories — that is, construction and land development loans, nonfarm nonresidential loans, and multifamily loans,” the report said. “Almost all banks that reportedly eased CRE credit policies cited more aggressive competition from other banks or nonbank lenders as an important reason for easing.”
Meanwhile, standards tightened for auto and credit card loans in the first quarter of 2018, the report said.
The Federal Reserve is “widely expected to raise borrowing costs” when bank officials meet on June 12-13, according to a Reuters report. The financial institution raised interest rates three times in 2017 and once in March, Reuters noted.