Loans to Businesses Tightened

Worried about the economy, banks made loans harder to get for businesses and for many consumers from November through January, the Federal Reserve Board said Monday.

Lending standards generally remained unchanged, however, for consumers who were buying or refinancing homes, according to the survey of senior loan officers.

The survey showed that 45% of banks tightened credit for businesses with $50 million or more in annual sales, and 42% did so for companies with sales under $50 million a year. None had eased credit standards for businesses. The loan officers cited a “less favorable or more uncertain economic outlook” as the main reason for tightening credit.

Meanwhile, demand for commercial and industrial loans weakened in the first full quarter after the Sept. 11 terrorist attacks, the Fed found, as businesses cut back investments in plants and equipment and called off mergers and buyouts.

About one in six banks also tightened standards for credit card and other consumer loans, except for mortgages. Of the 55 domestic banks surveyed, one reported it tightened mortgage-lending standards “somewhat,” while the rest were unchanged.

A Fed survey of foreign banks with branches and agencies in the United State found even greater caution among loan officers. Among the foreign banks, the percentage that had tightened standards for U.S. customers seeking commercial and industrial loans rose to 70% in January from 64% in October.

Although U.S. banks were still tightening credit for businesses, the rate at which they were doing so had slowed since the Fed’s last survey, which covered the August-October quarter. At that time, with the memories of the World Trade Center and Pentagon attacks still fresh, 51% had tightened lending to larger companies, compared with 45% in the latest report.