The January 2013 Senior Loan Officer Opinion Survey on Bank Lending PracticesFull report (353 KB PDF)
The January 2013 Senior Loan Officer Opinion Survey on Bank Lending Practices addressed changes in the supply of, and demand for, bank loans to businesses and households over the past three months. This summary is based on responses from 68 domestic banks and 22 U.S. branches and agencies of foreign banks.1
In the January survey, generally modest fractions of domestic banks reported having eased their standards across major loan categories over the past three months on net.2 Domestic respondents indicated that demand for business loans, prime residential mortgages, and auto loans had strengthened, on balance, while demand for other types of loans was about unchanged. U.S. branches and agencies of foreign banks, which mainly lend to businesses, reported little change in their lending standards, while demand for their loans was reportedly stronger on net.
On balance, small percentages of domestic respondents reported that lending standards on commercial and industrial (C&I) loans had been eased over the past three months and that many terms on such loans had also been loosened. In addition, moderate net fractions of domestic banks reported that demand for C&I loans from firms of all sizes had increased over the survey period.3 Small net fractions of domestic and foreign respondents indicated that commercial real estate (CRE) lending standards had been eased over the past three months, while significant percentages of both types of respondents reportedly experienced increased demand for such loans on net.
On the household side, domestic banks reported that standards for both prime and nontraditional mortgages were essentially unchanged over the past three months. Respondents indicated that demand for prime residential mortgages increased, on net, while demand for nontraditional residential mortgages was unchanged. Within consumer lending, a moderate fraction of domestic banks reported an easing of standards on auto loans, on net, while standards on other types of consumer loans were about unchanged. On balance, banks indicated having eased selected terms on consumer loans over the survey period. A moderate fraction of respondents continued to experience stronger demand for auto loans, on net, while demand for credit card loans was reportedly unchanged.
The January survey also included three sets of special questions: The first set asked banks about lending to and competition from banks headquartered in Europe; the second set asked banks about changes in their lending policies on CRE loans over the past year; and the third set asked banks about their outlook for asset quality in major loan categories during 2013. In response to the first set, only a small fraction of domestic banks indicated that lending standards to European banks and their affiliates had been tightened, on net, while foreign respondents' standards were reportedly little changed for such institutions. In response to the second set, respondents indicated that they had eased selected CRE loan terms over the past 12 months on net, with the rest of the surveyed terms having been about unchanged. Finally, respondents' answers for the outlook for asset quality revealed that moderate to large fractions of banks expect improvements in credit quality in most major loan categories on balance.
Questions on commercial and industrial lending. Modest fractions of domestic survey respondents, on net, indicated that their C&I lending standards had been eased somewhat for all firm sizes over the survey period. On balance, most loan terms were eased regardless of firm size. Moderate to large fractions of banks again reported having reduced spreads of loan rates over their banks' cost of funds, the use of interest rate floors, and the cost of credit lines for all firm sizes. Almost all respondents that reported having eased either standards or terms over the past three months cited more-aggressive competition from other banks or nonbank lenders as an important reason for having done so. As in the previous survey, no other reasons were broadly cited as important. Moderate fractions of domestic banks indicated stronger demand for C&I loans by firms of all sizes, on net, and cited their customers' increased investment in plant or equipment and increased need to finance mergers or acquisitions and accounts receivable as the main reasons for increased loan demand. In addition, several banks also noted that some firms had borrowed in part to fund payments to employees and investors ahead of anticipated changes to the tax code after year-end.
On balance, U.S. branches and agencies of foreign banks reported that their C&I lending standards had remained about the same over the past three months. A moderate net fraction of foreign respondents reported having reduced loan spreads over their cost of funds, while only small fractions reported having changed other lending terms on net. About 20 percent of foreign respondents reported stronger demand for C&I loans over the past three months, on net, and most cited their customers' increased merger or acquisition financing needs as a very important reason for stronger demand.
Special questions on lending to and competition from European banks. The January survey again included special questions about lending to European banking institutions and their affiliates. On balance, about 10 percent of domestic banks reported that their standards for loans to European banks had tightened over the past three months, a smaller fraction relative to the previous two surveys. Furthermore, foreign respondents indicated that their standards on such loans were essentially unchanged. Respondents reported that they had experienced little change in demand for loans from European banks.
Most domestic banks who reported competing with European banks indicated that they had experienced a decrease in competition from such institutions over the past three months, but the decrease did not appreciably boost their business. About one-third of respondents that reportedly compete with European banks noted an increase in business to some extent.
Questions on commercial real estate lending. A modest net fraction of domestic banks reported that they had eased standards on CRE loans over the previous three months and a large share indicated that demand for such loans had increased. On balance, foreign respondents reported similar trends in CRE lending conditions in the fourth quarter; a small fraction indicated that they had eased lending standards and a large fraction reportedly experienced stronger demand for CRE loans.
Special question on commercial real estate lending. The January survey also included a special question regarding changes in specific lending policies for CRE loans over the past year (repeated annually since 2001). During the past 12 months, on net, many domestic banks reportedly had reduced the spreads on CRE loans and several banks eased policies regarding the maximum size and maturity of such loans. However, banks indicated no change in their policies for debt service coverage ratios or loan-to-value ratios. Foreign respondents also indicated that policies on spreads and maximum loan size for CRE loans were eased somewhat, on balance, and those on other terms were about unchanged.
Lending to Households
(Table 1, questions 13–26)
Questions on residential real estate lending. Respondents reported little change in their standards for both prime and nontraditional residential real estate loans. Demand for prime residential mortgage loans had reportedly increased over the past three months, on net, while demand for nontraditional residential mortgage loans was about unchanged. Standards for home equity lines of credit (HELOCs) were about unchanged while a small fraction of banks reportedly experienced weaker demand for such loans on net.
Questions on consumer lending. Responses from domestic banks indicated that they had again eased standards on auto loans over the past three months. However, standards on credit card loans and other consumer loans were little changed. On balance, several banks reported that they had reduced spreads on consumer loans other than credit card loans. A modest fraction of banks also reported having increased the maximum maturity of auto loans on net. Other terms for consumer loans were reportedly little changed over the past three months.
Demand for auto loans reportedly increased on balance, while demand for credit card loans was essentially unchanged. A modest fraction of banks reported stronger demand for other consumer loans on net.
Special questions on banks' outlook for asset quality in 2013
(Table 1, questions 27-29; Table 2, questions 12-13)
The January survey contained a set of special questions on respondents' expectations for loan quality in 2013 (repeated annually since 2006). Overall, large fractions of domestic banks, on net, expected improvements in delinquency and charge-off rates during 2013 for most loan categories included in the survey, assuming that economic activity progresses in line with consensus forecasts. Moreover, expectations for improvement in most loan categories were about the same as the corresponding net fractions from a year ago.
Regarding the outlook for the quality of business loans, about 40 percent of domestic banks, on net, reportedly expect delinquency and charge-off rates on their C&I loans to all sizes of firms to decline in 2013. These responses indicate a somewhat less widespread expected improvement in the quality of C&I loans relative to the 2012 survey, which is largely consistent with already low delinquency and charge-off rates on such loans by historical standards. Similar to last year, about 55 percent of domestic banks indicated that they expect improvement in the quality of CRE loans in 2013. Turning to foreign respondents, about 20 percent, on net, anticipate improvement in the quality of C&I loans to large and middle-market firms this year. Meanwhile, about 45 percent of foreign respondents forecast improvement in the quality of CRE loans on balance, a sizable increase from the 25 percent that reportedly expected improvement last year.
About 50 percent of domestic banks expect the delinquency and charge-off rates on prime and nontraditional residential real estate loans to improve in 2013, on net, about the same fractions reported in last year's survey. Expectations for improvements this year in the quality of HELOCs stayed roughly the same as last year, with about one-third of the respondents anticipating an improvement in the quality of such loans.
Among major loan categories, domestic banks were least likely to expect improvement in the quality of consumer loans in 2013. On balance, about 10 percent of banks expected improvement in credit card loans, and similar fractions projected improvement in auto and other consumer loans.
1Respondent banks received the survey on or after December 27, 2012, and responses were due by January 15, 2013. Return to text
2 For questions that ask about lending standards or terms, reported net fractions equal the fraction of banks that reported having tightened standards ("tightened considerably" or "tightened somewhat") minus the fraction of banks that reported having eased standards ("eased considerably” or "eased somewhat"). For questions that ask about demand, reported net fractions equal the fraction of banks that reported stronger demand ("substantially stronger" or "moderately stronger") minus the fraction of banks that reported weaker demand ("substantially weaker" or "moderately weaker"). Return to text
3The survey asks respondents separately about their standards for and demand from large and middle-market firms, which are generally defined as firms with annual sales of $50 million or more, and small firms, those with annual sales of less than $50 million. Return to text
This document was prepared by Emre Yoldas, with the assistance of Amanda Ng, Division of Monetary Affairs, Board of Governors of the Federal Reserve System.