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Fed releases April SLOOS on bank lending practices from Q1 2024
On May 6, the Fed released its quarterly survey of the Senior Loan Officer Opinion Survey (SLOOS) on bank lending practices for the first quarter of the year which revealed tightened lending standards and a decrease in demand across loans. Regarding business lending, the survey asked banks about commercial and industrial lending (C&I) and commercial real estate lending (CRE). For C&I loans, banks reported stricter standards and a decline in demand from firms of all sizes. Banks reported tightening due to a less favorable economic outlook, reduced tolerance for risk, and a worsening of industry-specific problems. For CRE loans, banks reported a tightening of standards for all types of loans. A significant share of banks reported weaker demand for nonfarm nonresidential and multifamily residential lending. For household lending, banks also tightened residential real estate (RRE) loan standards, while demand for all RRE loan types declined. Home equity lines of credit also faced stricter standards. Banks also tightened consumer lending standards for credit card, auto, and other consumer loans. Demand for these loans decreased as well, with a significant drop in auto loan inquiries.
Fed Survey: CRE Tightening Trend Continues
On February 6, the Fed released its January 2017 senior loan officer survey, addressing changes in the standards and terms on, and demand for, bank loans to businesses and households over the past three months. The January survey results indicated that over the fourth quarter of 2016, on balance, lenders left their standards on commercial and industrial (“C&I”) loans unchanged, while tightening credit for commercial real estate (“CRE”) loans. Banks reported that they expect to ease standards on C&I loans and for the asset quality of such loans to improve somewhat this year. In contrast, banks expect to tighten standards on CRE loans, while they expect the asset quality of most CRE loan categories to remain unchanged. As to loans to households, banks reported that demand for most types of home-purchase loans weakened over the fourth quarter. On balance, banks reported that they expect to ease standards and to see asset quality improve somewhat for most residential home-purchase loans in 2017.
For additional details see:
- Table 1 – Opinion Survey on Bank Lending Practices at Selected Large Banks in the U.S.
- Table 2 – Opinion Survey on Bank Lending Practices at Selected Branches & Agencies of Foreign Banks
- Charts – Measures of Supply and Demand for Commercial & Industrial Loans
OCC Updates Handbook to Reflect Current CRE Lending Guidance
On August 20, the OCC issued bulletin OCC 2013-19, which attaches the Commercial Real Estate Lending booklet of the Comptroller’s Handbook to replace the OCC’s Commercial Real Estate and Construction Lending booklet. The new booklet reflects guidance issued since the prior booklet was released in 1995. That updated guidance relates to prudent loan workouts, management of concentrations, stress testing, updated interagency appraisal guidelines, and statutory and regulatory developments in environmental risk management. The booklet also incorporates discussions of statutes and regulations governing federal savings associations.
Federal Reserve Board and OCC Publish White Paper on CRE Concentration Guidance
On April 3, the Federal Reserve Board and the OCC jointly published a white paper on the regulators’ study of bank performance in the context of 2006 interagency guidance regarding commercial real estate lending that established supervisory criteria for banks that exceeded 100 percent of capital in construction lending and 300 percent of capital in total commercial real estate (CRE) lending. According to the paper, banks with high concentrations of construction and total commercial real estate lending that exceeded supervisory criteria failed at higher rates than banks with lower concentrations. Specifically key findings include: (i) 13 percent of banks that exceeded only the 100 percent construction criterion failed, (ii) among banks that exceeded both the construction and total CRE lending supervisory criteria, 23 percent failed during the three-year economic downturn from 2008 through 2011, compared with 0.5 percent of banks for which neither of the criteria was exceeded, (iii) construction lending was a key driver in many failures, and (iv) banks that were public stock companies and exceeded the supervisory criteria on CRE concentrations tended to experience greater deterioration in condition than banks below the criteria, and banks with CRE concentrations higher than the guidance criteria experienced larger declines in their market capital ratio during the recent economic downturn.