A Federal Reserve survey showed a “relatively large” percentage of banks easing standards for commercial loans.
WASHINGTON – U.S. banks eased standards and terms on loans to businesses as commercial lending led a credit thaw, according to a Federal Reserve survey.
“Domestic banks, on balance, reported having eased their lending standards and having experienced stronger demand in several loan categories over the past three months,” the central bank said in its quarterly survey of senior loan officers released Monday. The fraction of banks easing standards for business loans was described as “relatively large.”
The Federal Open Market Committee reviewed the report at a meeting last week before reiterating that economic growth will probably “proceed at a moderate pace.” The FOMC signaled it may step up monthly bond buying beyond $85 billion if the need arises to overcome a slump in growth or a decline in inflation.
“Bank credit for households and businesses is critical to continued economic expansion,” Fed Chairman Ben Bernanke said in speech on April 8. “It is positive for the recovery that banks are also notably stronger than they were a few years ago.”
Demand for business loans increased even as “such reports were less widespread than in the previous survey,” Monday’s report showed. Banks that eased standards for business loans “generally cited increased competition for such loans as an important reason for having done so.”
Banks in the United States have boosted lending as the economy gains strength. The total value of loans at U.S. banks climbed 4.1 percent in the past year to $7.3 trillion in March, according to a Fed report last week. Lending to businesses has led the way.
“On the household side, the survey results were more mixed,” the Fed said. A “few” banks eased standards on prime residential mortgages.
Banks eased standards and saw rising demand for both credit card and auto loans, while standards and demand for other consumer loans were “about unchanged.” The share of banks easing standards was described as “small.”