August 1997
Bank Lending Practices
The August 1997 Senior Loan Officer Opinion Survey on Bank Lending Practices
(covering, for the most part, changes over the preceding three months) posed
questions about bank lending standards and terms, loan demand by businesses and
households, and securities backed by commercial mortgages.
A small net percentage of the domestic respondents--about 5 percent--reported
easing standards for C&I loans to large and middle market firms and to
small businesses over the past three months (chart). About 40 percent, on net,
narrowed spreads of C&I loan rates over their bank's cost of funds on loans to
large and middle market borrowers, and about 25 percent, on net, narrowed spreads
on loans to small businesses. Similar percentages indicated lower costs of credit
lines, and smaller percentages eased other terms including the maximum size of
credit lines, loan covenants, and collateralization requirements. The degree of
easing found in the August survey is similar to that found in the January and May
surveys. Those banks that eased said they did so because of increased competition
from other banks, and, to a lesser extent, from nonbank lenders. Foreign
respondents reported no change in standards for C&I loans, and only a few
indicated a change in terms.
The August survey was the seventh in a row that found a tightening in
standards for loans to households. However, the net percentages tightening were
smaller in August, suggesting that more banks may now believe they have adjusted
their lending stance appropriately to the deterioration in the performance of
these loans that occurred over the past two years. In August, less than 25
percent of the respondents said they had tightened standards for credit card
applications over the past three months and less than 10 percent, on net, had
tightened standards for other consumer loans. These percentages, while
significant, are about half those found in May. One-fourth of the respondents
also lowered credit limits on credit card lines, although only small net fractions
of banks tightened other terms on consumer loans. Despite these tighter standards
and terms, about 10 percent of the banks, on net, said that their willingness to
make consumer installment loans had increased over the past three months, the
largest net percentage expressing increased willingness since the May 1995 survey
(chart). About 10 percent of the respondents, on net, reported decreased demand
for consumer loans.
Special questions on the survey asked about banks' issuance and holdings of
commercial mortgage-backed securities, which have grown rapidly in recent years.
About one-fourth of the domestic respondents, concentrated among the larger banks,
and one-fifth of the foreign respondents had securitized commercial mortgages.
Almost all the respondents that had securitized commercial mortgages had done so,
at least in part, through a conduit program. These programs are typically
arrangements sponsored by an investment bank to package loans originated by
correspondent lenders. The investment bank establishes lending guidelines under
which the correspondents originate their loans, thus promoting uniformity in the
loans backing the securities.
Charts (16 KB PDF) Measures of lending practices from current and previous surveys Chart data (ASCII)
Table 1 (60 KB PDF)
Table 2 (33 KB PDF) Full report (76 KB PDF) Home | Surveys | Senior loan survey Accessibility To comment on this site, please fill out our feedback form. Last update: August 22, 1997, 12:00 PM |