The October Senior Loan Officer Opinion Survey showed banks slightly tightening credit conditions for commercial and industrial (C&I) loans even as demand was down. A “moderate” share of banks decreased the spread of loan rates over costs of funds for larger firms and a “modest” share for small firms.. Although standards were “basically unchanged” for most types of C&I loans, they were tighter for commercial real estate (CRE) while demand for CRE loans was down.
Where banks tightened standards on loans they cited, “a reduced tolerance for risk; and a worsening of industry-specific problems as important reasons”. Where demand for loans was weaker, the report said, “customers experiencing increases in internally generated
funds; a reduced need to finance mergers or acquisitions, accounts receivable, and inventories;
and reduced investment in plant or equipment as important reasons.” The report added, “Furthermore, major shares of bankss also reported customer borrowing shifting to other sources of credit as an important reason.”
Household loan standards were “basically unchanged” for residential real estate loans (RRE) with demand up for home lending. Standards were unchanged for all types of mortgages except subprime where standards were tighter. Standards on other types of household credit were tighter with consumer demand for loans higher. The reported said, “moderate net shares of banks reportedly increased minimum required credit scores for credit cards, and modest net shares of banks raised minimum required credit scores for auto and other consumer loans.”
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