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Weekly Economic Commentary

 
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Senior Loan Officer Survey – Bank Lending Remains Restrictive

November 7, 2011

orange_carrat_arrow Download PDF Version

The Fed’s Senior Loan Officer Survey shows that fewer banks eased standards on lending to large and middle-market firms (Made up of firms reporting $50 million and over in annual sales) during the third quarter compared with prior surveys (see Chart 1).


Chart 1 - 11 07 2011


The situation was not too different in the case of small businesses. Credit standards have remained largely restrictive, with nearly 90% of bank reporting no change in approval rate of loans to small businesses and a small percentage of banks had tightening standards during the third quarter.


Chart 2 - 11 07 2011


The impact of the European crisis is evident in the response to a special question. The survey noted that “a large number of both domestic and foreign respondents indicated they had tightened standards on loans to European banks and their affiliates or subsidiaries.”

Loan demand from large and medium and small firms fell according to the latest survey (see Chart 3). The cash rich position of large and middle market firms has led to reduction in loan demand. In the case of small firms, expectations of poor sales possibly played role in the reduction of loan demand.


Chart 3 - 11 07 2011


In the household sector, the demand for consumer loans was nearly unchanged, while demand for home mortgages increased, primarily refinance (see Chart 4). Banks were mostly holding their underwriting standards unchanged for prime home mortgages (see Chart 5), fewer banks had eased mortgage underwriting standards in the latest survey (see Chart 5).



Chart 4 - 11 07 2011





Chart 5 - 11 07 2011

 

 

 

 

 

 

 

 

 

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The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.
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