Charting Banking XV: Fed survey on lending practices

by PlanMaestro

The Federal Reserve just published a week ago the quarterly survey on bank lending practices. Well, what is this survey?

Survey of approximately sixty large domestic banks and twenty-four U.S. branches and agencies of foreign banks. The Federal Reserve generally conducts the survey quarterly, timing it so that results are available for the January/February, April/May, August, and October/November meetings of the Federal Open Market Committee. The Federal Reserve occasionally conducts one or two additional surveys during the year. Questions cover changes in the standards and terms of the banks’ lending and the state of business and household demand for loans. The survey often includes questions on one or two other topics of current interest.

In an historic perspective, the results were encouraging compared with other periods of tightening standards like the early 1990s and 2000s. They were also slightly positive for all type of loans: an improving trend with Commercial and Industrial loans ahead of the pack. Competitive pressures are being felt and this is the best incentive for banks to come back to the market:

The July survey indicated that, on net, banks had eased standards and terms over the previous three months on loans in some categories, particularly those categories affected by competitive pressures from other banks or from nonbank lenders. While the survey results suggest that lending conditions are beginning to ease, the improvement to date has been concentrated at large domestic banks. Most banks reported that demand for business and consumer loans was about unchanged.

In the next installment we will review total loans and the loans/deposits ratio to check if this willingness to lend is being reflected in the actual data.