Banks in the U.S. saw increased demand from businesses andconsumers for lending and in turn made those loans more readilyavailable, according to a Federal Reserve report.

“Domestic banks, on balance, reported having eased their lendingstandards on many types of business and consumer loans and havingexperienced increases in loan demand, on average, over the pastthree months,” the Fed said today in its quarterly survey of seniorloan officers.

The survey shows banks loosening the reins of credit for manycategories of lending, including commercial real estate, commercialand industrial loans for firms of all sizes, credit cards, autoloans, and other consumer loans. An exception was declining demandfor mortgages.

The report supports forecasts for stronger economic growth amongFed policy makers, who last week trimmedtheir monthly bond purchases to $65 billion from $75 billion.They see growth picking up this year to 2.8 percent to 3.2 percent,according to their most recent forecasts released in December.

Banks also reported an improved outlook for 2014, today's surveyshowed. About 20 percent to 40 percent of banks said they expectdelinquencies on most types of business loans to decline this year.About 40 percent expect mortgage delinquencies and writeoffs tofall, and 15 percent to 20 percent expect credit-card loans andother consumer loans to improve.

The majority of banks said auto loans to borrowers with lowcredit scores would be an exception, and that delinquencies andcharge-offs would increase.

The Fed said large banks eased standards on mortgages, whilesmall banks tightened them. The share of banks easing andtightening was described as “modest.” Demand for mortgages wasweaker, according to the survey, which was conducted from Dec. 30to Jan. 14.

The mortgage market is closely watched by the Fed, which hassought through low interest-rate policies to spur borrowing,especially for houses and automobiles that many consumers financewith loans.

In a special set of questions, the Fed asked banks about theenvironment for high-risk, high-yield leveraged loans. The centralbank has sought to curb froth in the leveraged-loan market byissuing supervisory guidance to discourage banks from makingreckless loans.

Banks reported they had tightened standards on leveraged loansand that some loans had been “curtailed or significantly altered”by the Fed's efforts to rein in the market. “A majority of thembelieved that affected borrowers would be able to turn to othersources of funding,” the survey said.

Especially Strong

The total value of loans at U.S. banks climbed 2.2 percentduring the past year to $7.39 trillion as of Jan. 22, according toa Fed report last week. Lending to businesses has been particularlystrong, with commercial and industrial loans climbing to $1.62trillion, a 7.5 percent increase from a year earlier.

The latest round of bond purchases begun in September 2012helped drive down the yield on the 10-year Treasury note to as lowas 1.63 percent last year.

As Fed officials moved toward winding down the program, yields climbed to as high as 3.03percent in December. The benchmark note fell 0.06 percentage pointto 2.58 percent at 1:51 p.m. in New York.

The central bank's survey of loan officers is based on responsesfrom 75 domestic banks and 21 U.S. branches and agencies of foreignbanks. The Fed doesn't identify the banks.

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