The US central bank Federal Reserve’s October lending survey found tighter standards for small-business loans and weaker demand for business credit during the third quarter. Banks also tightened commercial real estate lending standards. Household borrowing showed a mixed picture, with stronger demand for credit cards and weaker demand for auto loans, while most consumer lending standards remained unchanged.
The Federal Reserve, the US central bank, found that banks tightened standards on commercial and industrial loans to small firms during the third quarter. Its October survey reported broadly unchanged standards for large and middle-market firms. Banks also tightened standards and reported weaker demand across commercial real estate loan categories.[1], [2]
Banks cited a less favourable or more uncertain economic outlook and worsening industry problems when explaining tighter business lending standards. Small firms faced tighter collateral requirements and greater use of interest-rate floors. Demand for business credit weakened across company sizes. Banks linked that decline to reduced investment in plant and equipment and customers choosing more attractive bank or nonbank financing.[1]
General lending standards for credit cards, auto loans and other consumer loans were mostly unchanged. Exceptions included tighter credit-card limits and stricter minimum credit scores for auto loans. Banks reported stronger credit-card demand, weaker auto-loan demand and unchanged demand for other consumer credit. The survey received responses from 61 domestic banks and 18 US branches and agencies of foreign banks, covering changes over the preceding three months.[1]
