Survey Finds Some Credit Easing, Stronger Loan Demand

On balance, banks eased credit standards during the last three months as demand for loans rose, according to the Federal Reserve’s July survey of senior loan officers released yesterday. Demand for business and mortgage loans increased, with close to half of respondents reporting moderately stronger demand for commercial real estate lending and a majority of respondents reporting moderate growth in mortgage loan demand.

“Of the domestic respondents that reported having eased either standards or terms on [commercial and industrial] loans over the past three months, all but two cited more-aggressive competition from other banks or nonbank lenders as an important reason for having done so,” the Fed reported. Other reasons cited by large numbers of respondents included a more favorable or less uncertain economic outlook and increased risk tolerance.

In consumer lending, net percentages of respondents reported easing standards on prime mortgages (7.4 percent), car loans (14 percent) and consumer lending such as credit cards (3.7 percent). “Demand for all three types of consumer loans asked about in the survey had reportedly strengthened, on balance, over the second quarter,” the Fed said.

--ABA Daily Newsbytes