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Lending freeze may be starting to thaw, Fed report shows

May 5, 2009

More banks are opting to keep their lending standards unchanged for commercial and industrial loans, as well as for commercial real estate lending, rather than tightening them, according to a report from the Federal Reserve Board.

About 39% of the 53 domestic banks that the Fed had polled in its Senior Loan Officer Opinion Survey on Bank Lending Practices said that they had tightened their credit standards on commercial and industrial loans to firms of all sizes last month. That is down from 65% in January.

Last month, 60.4% of the polled banks said that they have kept their standards “basically unchanged,” up from 35.8% in January.

The Fed noted in its report that while this proportion is still high, the results mark the first time in more than a year that the percentage of banks reporting tightening was below 50%.

Of the 23 U.S. branches and agencies of foreign banks that the Fed had also surveyed, about 30% tightened their credit standards for commercial and industrial loans, compared with 65% in January.

The Fed surveyed the banks between March 31 and April 14.
Credit standards for commercial real estate lending also relaxed during the past three months, with 66% of the domestic banks tightening their standards, compared with about 80% in January.

However, institutions continued to crack down on residential mortgage lending: 49% of domestic lenders said that they had had tightened their standards on prime mortgages during the past three months.

Similarly, demand for these loans has also risen, with 51% of the banks reporting stronger demand from consumers.

Banks also continued to cut credit lines for existing consumers: 54.5% said that they had reduced consumer credit card accounts during the past three months, while 33.4% said that they slashed business lines of credit.

Sourece: http://www.investmentnews.com/