Senior Loan Officer Opinion Survey on Bank Lending Practices
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The July 2024 Senior Loan Officer Opinion Survey on Bank Lending Practices
The July 2024 Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) addressed changes in the standards and terms on, and demand for, bank loans to businesses and households over the past three months, which generally correspond to the second quarter of 2024.1
Regarding loans to businesses, survey respondents reported, on balance, tighter standards and basically unchanged demand for commercial and industrial (C&I) loans to firms of all sizes over the second quarter. Meanwhile, banks reported tighter standards and weaker demand for all commercial real estate (CRE) loan categories.
For loans to households, banks reported, on balance, basically unchanged lending standards and weaker demand across all categories of residential real estate (RRE) loans. In addition, banks reported basically unchanged lending standards and unchanged demand for home equity lines of credit (HELOCs). Moreover, standards reportedly tightened for credit card and other consumer loans but remained basically unchanged for auto loans, while demand weakened for auto and other consumer loans but remained basically unchanged for credit card loans.
While banks, on balance, reported having tightened lending standards further for most loan categories in the second quarter, the net shares of banks that reported having tightened lending standards are lower than in the first quarter across almost all loan categories.
The July SLOOS included a set of special questions that inquired about the current level of lending standards relative to the midpoint of the range over which banks’ standards have varied since 2005. Banks reported that, on balance, levels of standards are currently on the tighter end of the range for all loan categories. Compared with the July 2023 survey, banks reported easier levels of standards for most loan categories except RRE loans, for which levels of standards were comparable with July 2023.
Lending to Businesses
(Table 1, questions 1–12; table 2, questions 1–8)
Questions on commercial and industrial lending. Over the second quarter, modest net shares of banks reported having tightened standards on C&I loans to firms of all sizes.2 Banks also reported having tightened most queried terms on C&I loans to firms of all sizes over the second quarter.3 Tightening was most widely reported for the use of interest rate floors and premiums charged on riskier loans, for which moderate net shares of banks reported having tightened these terms for loans to firms of all sizes.4 In addition, moderate net shares of banks reported having reduced the maximum size of credit lines and having tightened collateralization requirements for large and middle-market firms.5 On balance, large banks reported leaving C&I lending standards and most terms basically unchanged, while most other banks reported having tightened C&I lending standards and almost all terms for loans to firms of all sizes.6 Lastly, a modest net share of foreign banks reported having tightened standards on C&I loans, and moderate net shares of foreign banks reported having tightened C&I loan covenants and the costs of credit lines.
Of the banks that reported having tightened standards or terms on C&I loans, major net shares cited a less favorable or more uncertain economic outlook, worsening of industry-specific problems, a reduced tolerance for risk, and increased concerns about the effects of legislative changes, supervisory actions, or changes in accounting standards as important reasons for doing so. In addition, significant net shares of banks cited deterioration in the bank’s current or expected liquidity position, decreased liquidity in the secondary market for C&I loans, and less aggressive competition from other banks or nonbank lenders as reasons for tightening.
Regarding demand for C&I loans over the second quarter, banks, on balance, reported basically unchanged demand for C&I loans from firms of all sizes.7 Furthermore, banks reported that the number of inquiries from potential borrowers regarding the availability and terms of new credit lines or increases in existing lines was basically unchanged. Furthermore, a significant net share of foreign banks reported stronger demand for C&I loans over the second quarter.
The most frequently cited reasons for strengthening demand, reported by major net shares of banks, were increased customer financing needs for inventory, merger or acquisition, and accounts receivable; increased investment in plant or equipment; and a decrease in internally generated funds by customers.
Questions on commercial real estate lending. Over the second quarter, significant net shares of banks reported having tightened standards for all types of CRE loans. Significant net shares of other banks reported such tightening for all CRE loan categories, while large banks reported that lending standards were basically unchanged for all types of CRE loans. Meanwhile, moderate net shares of banks reported weaker demand for all types of CRE loans. Similar to domestic banks, a moderate net share of foreign banks reported having tightened standards for CRE loans. However, in contrast to domestic banks, a moderate net share of foreign banks reported stronger demand for CRE loans over the second quarter.
Lending to Households
(Table 1, questions 13–26)
Questions on residential real estate lending. Over the second quarter, banks reported that, on balance, lending standards were basically unchanged for all RRE loan categories.8 In addition, banks reported that standards for HELOCs were basically unchanged.
Meanwhile, banks reported weaker demand, on balance, for all categories of RRE loans over the second quarter. A significant net share of banks reported weaker demand for non-qualified mortgage (QM) non-jumbo mortgages, while moderate net shares of banks reported weaker demand for government, QM non-jumbo non-government-sponsored enterprise (GSE)-eligible, subprime, and non-QM jumbo mortgage loans, and modest net shares of banks reported weaker demand for GSE-eligible and QM jumbo mortgage loans. Meanwhile, banks reported that demand for HELOCs was basically unchanged.
Questions on consumer lending. Over the second quarter, moderate net shares of banks reported having tightened lending standards for credit card and other consumer loans, while standards were basically unchanged for auto loans. Banks also reported having tightened most queried terms on credit card loans. Specifically, moderate net shares of banks reported lowering credit limits and increasing minimum credit score requirements for credit card loans, while a modest net share of banks decreased the extent to which loans are granted to customers that do not meet credit scoring thresholds. For auto loans, in contrast, modest and moderate net shares of banks reported having eased the maximum maturity and narrowing interest rate spreads over the cost of funds, respectively, while leaving unchanged all other queried terms on net. For other consumer loans, banks, on balance, reported leaving basically unchanged all queried terms except for an increase in minimum required credit scores, which was reported by a modest net share of banks.9
Regarding demand for consumer loans, moderate and modest net shares of banks reported weaker demand for auto loans and for other consumer loans, respectively, while demand for credit card loans was basically unchanged over the second quarter.
Special Questions on Current Level of Banks’ Lending Standards
(Table 1, question 27; table 2, question 9)
As with all July surveys since 2011, the July 2024 survey included a set of special questions that asked respondents to describe the current levels of lending standards at their bank. Specifically, respondents were asked to consider the range over which their lending standards have varied since 2005 and to report where the level of standards currently is relative to the midpoint of that range.
For C&I loans, modest to significant shares of banks reported levels of standards that were tighter, on net, than the midpoints of their historical ranges for all C&I loan categories. Nonetheless, the July 2024 survey results indicate an easing of standards from a year ago, when the net shares of banks that reported standards to be on the tighter end of the range were substantially higher. Among foreign bank respondents, C&I loan standards were similarly reported to be tighter, on net, than the midpoints of their historical ranges for all categories except syndicated loans to investment-grade firms, for which standards were reported to be on the easier end of the range.
For CRE loans, major net shares of banks reported that lending standards were on the tighter ends of their historical ranges for all loan categories. These shares are, however, lower than those reported in the July 2023 survey. Similarly, major net shares of foreign banks also reported that standards on all categories of CRE loans were on the tighter end of their historical ranges.
Regarding RRE loans, significant net shares of banks reported that lending standards for jumbo mortgage loans and GSE-eligible residential loans were on the tighter ends of their ranges. For government residential mortgages, a moderate net share of banks reported standards toward the tighter end of the range. Additionally, a significant net share of banks reported that standards on HELOCs were on the tighter end of their range. The net shares of banks reporting that levels were at the tighter end of the range were at similar levels in the July 2024 survey as in the July 2023 survey for all RRE loan categories but modestly lower for HELOCs.
Regarding consumer loans, standards, on net, were on the tighter ends of their historical ranges for all consumer loan categories, especially for subprime credit card and subprime auto loans, with significant net shares of banks reporting standards for these loans being on the tighter end of their ranges. Meanwhile, moderate and modest net shares of banks reported that standards on prime credit card and prime auto loans were on the tighter end of their ranges, respectively. For other consumer loans, a significant net share of banks reported standards on the tighter end of their range. Compared with the July 2023 survey, lower net shares of banks in the July 2024 survey reported standards on the tighter end of the range.
Overall, responses to the July 2023 and 2024 surveys indicate that banks’ lending standards have eased since 2023 for most loan categories, though they remained tight relative to their historical ranges.
This document was prepared by Zeke Sabbert and Carlo Wix, with the assistance of Jaron Berman and Paige Ehresmann, Division of Monetary Affairs, Board of Governors of the Federal Reserve System.
1. Responses were received from 65 domestic banks and 20 U.S. branches and agencies of foreign banks. Respondent banks received the survey on June 20, 2024, and responses were due by July 8, 2024. Unless otherwise indicated, this summary refers to the responses of domestic banks. Return to text
2. For questions that ask about lending standards or terms, "net fraction" (or "net percentage") refers to the fraction of banks that reported having tightened ("tightened considerably" or "tightened somewhat") minus the fraction of banks that reported having eased ("eased considerably" or "eased somewhat"). For questions that ask about loan demand, this term refers to the fraction of banks that reported stronger demand ("substantially stronger" or "moderately stronger") minus the fraction of banks that reported weaker demand ("substantially weaker" or "moderately weaker"). For this summary, when standards, terms, or demand are said to have "remained basically unchanged," the net percentage of respondent banks that reported either tightening or easing of standards or terms, or stronger or weaker demand, is greater than or equal to 0 and less than or equal to 5 percent; "modest" refers to net percentages greater than 5 and less than or equal to 10 percent; "moderate" refers to net percentages greater than 10 and less than or equal to 20 percent; "significant" refers to net percentages greater than 20 and less than 50 percent; and "major" refers to net percentages greater than or equal to 50 percent. Return to text
3. Lending standards characterize banks' policies for approving applications for a certain loan category. Conditional on approving loan applications, lending terms describe banks' conditions included in loan contracts, such as those listed for C&I loans under question 2 to both domestic and foreign banks and those listed for credit card, auto, and other consumer loans under questions 21—23 to domestic banks. Thus, standards reflect the extensive margin of lending, while terms reflect the intensive margin of lending. The eight lending terms that banks are asked to consider with respect to C&I loans are the maximum size of credit lines, maximum maturity of loans or credit lines, costs of credit lines, spreads of loan rates over the bank's cost of funds, premiums charged on riskier loans, loan covenants, collateralization requirements, and use of interest rate floors. Return to text
4. Banks were asked about the costs, maximum size, and maximum maturity of credit lines; spreads of loan rates over the bank's cost of funds; premiums charged on riskier loans; terms on loan covenants; collateralization requirements; and the use of interest rate floors. Return to text
5. Large and middle-market firms are defined as firms with annual sales of $50 million or more, and small firms are those with annual sales of less than $50 million. Return to text
6. Large banks are defined as those with total domestic assets of $100 billion or more as of March 31, 2023. Other banks are defined as those with total domestic assets of less than $100 billion as of March 31, 2023. Return to text
7. Other banks reported weaker demand or demand being basically unchanged, while large banks reported modest or moderate strengthening in demand from firms of all sizes. Return to text
8. The seven categories of residential home-purchase loans that banks are asked to consider are GSE-eligible, government, QM non-jumbo non-GSE-eligible, QM jumbo, non-QM jumbo, non-QM non-jumbo, and subprime. See the survey results tables that follow this summary for a description of each of these loan categories. The definition of a QM was introduced in the 2013 Mortgage Rules under the Truth in Lending Act (12 C.F.R. pt. 1026.32, Regulation Z). The standard for a QM excludes mortgages with loan characteristics such as negative amortization, balloon and interest-only payment schedules, terms exceeding 30 years, alt-A or no documentation, and total points and fees that exceed 3 percent of the loan amount. For more information on the ability to repay (ATR) and QM standards under Regulation Z, see Consumer Financial Protection Bureau, "Ability-to-Repay/Qualified Mortgage Rule," webpage, https://www.consumerfinance.gov/rules-policy/final-rules/ability-to-pay-qualified-mortgage-rule. In addition, a loan is required to meet certain price-based thresholds included in the General QM loan definition, which are outlined in the Summary of the Final Rule; see Consumer Financial Protection Bureau (2020), "Qualified Mortgage Definition under the Truth in Lending Act (Regulation Z): General QM Loan Definition," final rule (Docket No. CFPB-2020-0020), Federal Register, vol. 85 (December 29), pp. 86308–09, https://www.federalregister.gov/d/2020-27567/p-17. Return to text
9. Banks were asked about changes in credit limits (credit card accounts and other consumer loans only), maximum maturity (auto loans only), loan rate spreads over costs of funds, the minimum percent of outstanding balances required to be repaid each month, the minimum required credit score, and the extent to which loans are granted to borrowers not meeting credit score criteria. Return to text