Banking

Fed study: Lending requirements tightened up in 2nd quarter

Lending requirements for company and customer loans tightened up throughout the 2nd quarter of 2023, with weaker need reported in all loan classifications, according to the Federal Reserve’s senior loan officer viewpoint study launched today. Banks reported anticipating to even more tighten up requirements on all loan classifications in the 2nd half of the year. As for the factors, banks most regularly pointed out a less beneficial or more unsure financial outlook. They likewise anticipated wear and tear in security worths and the credit quality of loans.

C&I. Major (more than 50%) and substantial (20%-50%) net shares of banks reported tightened up requirements on C&I loans to big and middle-market companies and little companies, respectively. Banks reported tightening up on all queried loan terms on C&I loans to companies of all sizes over the 2nd quarter. Tightening was most commonly reported for spreads of loan rates over the expense of funds, premiums charged on riskier loans, and expenses of credit limit. In addition, substantial net shares of banks usually reported having actually tightened up the optimum size and maturity of credit limit, loan covenants, collateralization requirements and making use of rates of interest floorings to companies of all sizes.

CRE. Major net shares of banks reported tightened up requirements on all classifications of CRE loans, with comparable levels of net tightening up reported by big banks and other banks. Meanwhile, significant net shares of banks reported weaker need for all CRE loan classifications, with weakening in need more commonly reported by other banks than by big banks.

Mortgages. Banks reported tightened up financing requirements for all classifications of property realty loans and HELOCs. Significant net shares of banks reported having actually tightened up requirements on non-qualified-mortgage jumbo property loans and HELOCs, while moderate net shares (10%-20%) reported tightening up requirements on QM jumbo, non-QM non-jumbo, subprime, and QM non-jumbo, non-GSE qualified loans. In contrast, just modest net shares (5%-10%) of banks reported tightened up requirements on GSE-eligible and federal government loans. Meanwhile, substantial net shares of banks reported weaker need for HELOCs and all kinds of RRE loans other than for subprime home loan.

Personal financing. Significant net shares of banks reported tightened up requirements for charge card loans and other customer loans, while a moderate net share reported having actually done so for car loans. Consistent with tightened up requirements for charge card loans, banks likewise reported having actually tightened up practically all queried terms on customer loans.

Gabriel

A news media journalist always on the go, I've been published in major publications including VICE, The Atlantic, and TIME.

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