Banks tighten lending standards, see weaker commercial loan demand: Fed survey

FILE PHOTO: The Federal Reserve building is pictured in Washington, DC
FILE PHOTO: The Federal Reserve building is pictured in Washington, DC, U.S., August 22, 2018. REUTERS/Chris Wattie/File Photo

November 9, 2020

(Reuters) – U.S. banks tightened lending standards and loan terms on commercial loans in the third quarter, while demand for commercial loans dropped to its lowest in more than a decade as the coronavirus pandemic made businesses more cautious, according to a Federal Reserve survey released on Monday.

Banks also tightened standards on most forms of consumer credit, but demand there improved for loans for big-ticket purchases such as houses and automobiles, the Fed said in its quarterly Senior Loan Officer Opinion Survey.

Most banks reported that the overall level of loans in forbearance did not exceed 5%, although in some categories such as residential mortgages and certain commercial real estate loans a significant net share of banks said forbearance levels were above 10%, the survey showed. Banks offered loan forbearance earlier this year when the COVID-19 pandemic forced business closures and tens of millions of layoffs.

(Reporting By Dan Burns; Editing by Chizu Nomiyama)