Fed: Bank loan standards unchanged, demand weaker

By Mark Felsenthal

WASHINGTON (BestGrowthStock) – Most banks kept lending standards unchanged while loan demand weakened more gradually in the first quarter than previously, a Federal Reserve survey said on Monday, suggesting some glimmer of hope for borrowing and lending.

The Fed’s quarterly Senior Loan Officer Survey found that while banks were tightening their lending standards, the number doing so declined in a number of categories. At the same time, some banks eased lending standards in certain areas.

Banks easing lending policies were big institutions with assets above $20 billion.

“Demand for, and supply of, credit remains soft, but this survey suggests that conditions are gradually improving,” said Peter Newland of Barclays Capital.

The Fed surveys 56 domestic banks and the U.S. branches of 23 foreign-based banks for the report.

Large banks eased standards for home mortgage and home equity lines of credit, while smaller banks tightened standards for those two categories of lending.

The report, which Fed policymakers reviewed before they left unchanged their pledge to keep benchmark interest rates exceptionally low for an extended period last week, found slight improvements in commercial lending, with some banks easing standards and some terms on loans to large and medium firms.

Standards nevertheless remain quite stringent after the severe restriction of credit during the financial crisis, the Fed said.

Also, standards on commercial loans to small firms were roughly unchanged, and terms on such loans were tightened further over the past three months, the Fed said.

Banks said their standards for approving business credit cards are tighter than before the crisis. Many banks had tightened terms on business credit card loans to small firms in the past six months.

While a large number of banks continued to have tightened standards for commercial real estate loans in the quarter, the number is smaller than in the previous survey, the Fed said.

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(Reporting by Mark Felsenthal; Editing by James Dalgleish and Dan Grebler)

Fed: Bank loan standards unchanged, demand weaker