Fewer Banks Tightening Credit, Survey Finds

Fewer U.S. banks tightened standards for business loans in the last three months, suggesting less concern that a slowing economy is putting financial firms at risk, a Federal Reserve survey of senior bank lending officers showed.

The Fed’s periodic survey determined that 38.6% of banks toughened their rules “somewhat” on loans to firms with sales of $50 million or more, down from 51% in the last survey three months ago and the lowest level in a year. The survey of 77 domestic and foreign-owned lenders showed the second straight drop in the number of banks constraining credit to companies.

“Although the number of domestic and foreign banking institutions that reported tightening standards and terms on commercial and industrial loans over the past three months remained elevated, it was lower than earlier in the year,” the Fed said.

One bank reported tightening credit “considerably,” the survey showed. Almost 60% of banks said they hadn’t changed loan rules. Banks that did toughen credit conditions cited a less favorable or more uncertain outlook for the economy.

The survey included separate questions on bank exposure to computer firms. The results showed U.S. banks listed 8% of their commercial and industrial loans to makers of computer equipment, software and telecommunications gear. The survey said links to such firms were limited.

Respondents said they had tightened credit standards and rules “more aggressively” in the last year for computer companies than they had for other businesses, the Fed said.

Domestic banks kept their standards for consumer loans little changed since the previous survey in May, the Fed said. Demand for consumer loans was also largely unchanged, the survey found.