Risky Loan Survey

In a report issued Dec. 9, the Office of the Comptroller of the Currency said U.S. banks eased their loan underwriting standards and took on more credit risk this year, with lending trends similar to those in the years leading up to the financial crisis. "Similar to pre-crisis surveys, the 2015 survey reflects that many banks are pursuing portfolio growth and yield by loosening underwriting standards. Credit risk is increasing because of these trends," said the report. Underwriting standards for retail loans eased at 27 percent of the major banks surveyed, marking the highest level since 2006 and the third straight year of banks loosening their standards. The OCC says the less stringent standards were mainly associated with indirect loans and credit cards and could be seen in changes to credit lines, pricing, fees, debt-to-income ratios, scorecard cutoffs, and documentation requirements. Credit risk increased in just 16 percent of retail products. Banks attributed their underwriting of riskier loans to growth in lending along with easing underwriting standards, strong competition, expected changes in interest rates, and other economic factors.

From "U.S. Banks Ease Underwriting Standards, Increase Risky Loans: Federal Survey"
Reuters (12/09/15) Lambert, Lisa