Banks tightened up on C&I loans in early summer, left consumer lending standards unchanged

Standards have been tightened for commercial and industrial (C&I) loans, and standards have largely remained unchanged for consumer borrowings, according to a report issued by the Federal Reserve Monday.

According to results of the July 2022 Senior Loan Officer Opinion Survey on Bank Lending Practices, which gauged bank officer opinions in the latter part of June, banks have tightened their lending standards for the C&I loans to firms of all sizes during the second quarter. Commercial real estate (CRE) loans, according to the survey results, have also been tightened, even though demand has been weaker. However, the Fed said, demand for CRE loans secured by multifamily residential properties has strengthened on net.

Meanwhile, the Fed said, demand was weaker for most categories of residential real estate (RRE) loans, which – like most loans to households – did not see changes in standards.

The exception to that, however, were home equity lines of credit (HELOCs), for which the Fed reported banks did report tighter standards and stronger demand.

Standards for most of the rest of other consumer loans, the Fed reported, remained unchanged. Those include card loans, auto loans, and other consumer loans. Auto loans saw weakened demand, while credit card and other consumer loans saw strengthened demand.

As most of the loan officer opinion surveys do, the July report included some special questions. According to the Fed, those inquired about the current level of lending standards relative to the midpoint of the range over which banks’ standards have varied since 2005.

The Fed said banks reported that on balance, their lending standards for most C&I loans and consumer loans to prime borrowers are currently at the easier end of the range of standards since 2005. For subprime consumer loans and most categories of CRE loans, banks reported currently having relatively tighter levels of lending standards on net. Meanwhile, banks reported levels to be in the midpoint of the range of standards since 2005 for most RRE loans.

Compared with the July 2021 survey, the net share of banks reporting that levels were at the tight end of their historical range in July 2022 was higher for most C&I and CRE loan categories and lower for all RRE and consumer loan categories, the agency said.

The survey also included an additional set of special questions inquiring about banks’ expectations for changes in lending standards over the second half of 2022. Banks, on balance, reported expecting lending standards to tighten across all loan categories, the Fed said.

Senior Loan Officer Opinion Survey on Bank Lending Practices