For immediate release

The Federal Reserve is issuing additional guidance to assist bank examiners in their evaluations of the quality of banking organizations' credit risk management processes. The guidance is the result of an intensive study conducted by Federal Reserve supervision staff to assess the current state of bank lending terms and standards for domestic commercial and industrial loans. The study compared loans made in late 1995 with loans made in late 1997 and involved several hundred loans from across the country. The study identified noteworthy and measurable easing in bank lending terms and to some extent, bank lending standards. However, the overall quality of loans did not deteriorate significantly over the two year period. The guidance to examiners indicates that this is a critical time for banks to maintain their lending discipline and it highlights particular areas of concern, including the need for formal forward-looking analysis in the loan approval process. The study along with the supervisory letter (SR 98-18) detailing examiner guidance are attached. SR Letter 98-18 (with study) Summary of Findings, 1998 Loan Quality Assessment Project (153 KB PDF)

1998 Banking and consumer regulatory policy