Banks Ease Business Loan Standards

Fed report cites rising demand from companies of all sizes

Banks continue to ease their standards for business loans, as well as the terms on those loans, according to the latest quarterly survey of bank loan officers released today by the Federal Reserve Board. The banks surveyed also cited increased loan demand from businesses of all sizes, according to the Fed.

Fifteen percent of the 55 U.S. banks surveyed loosened their standards for commercial and industrial loans in the first quarter, according to the survey, as did 20% of the 20 foreign banks in the survey. Meanwhile, 55% of domestic banks say they lowered the spread they charge over their cost of funds to large and midsize business borrowers, and 50% lowered the spread they charge small business borrowers. Among foreign banks, 50% cut the spread they charge on loans.

About 25% of the domestic banks say they saw increased demand for loans from large and midsize companies, while just 10% cited a pick-up in loan demand from small businesses.

Asked about the credit quality of the companies seeking loans, about 55% of domestic banks say overall credit quality of large and midsize companies has improved, and 3% say there has been an improvement in the credit quality of small businesses applying for loans.

The complete Fed report is available here.

For additional coverage, see Reuters, the Wall Street Journal and Bloomberg.



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