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The April 2019 Senior Loan Officer Opinion Survey on Bank Lending Practices

The April 2019 Senior Loan Officer Opinion Survey on Bank Lending Practices addressed changes in the standards and terms on, and demand for, bank loans to businesses and households over the past three months, which generally corresponds to the first quarter of 2019.1  Responses were received from 73 domestic banks and 21 U.S. branches and agencies of foreign banks. Unless otherwise indicated, this summary refers to the responses of domestic banks.

Regarding loans to businesses, respondents to the April survey indicated that, on balance, they left their standards basically unchanged and eased some of the terms on commercial and industrial (C&I) loans to large and middle-market firms, while standards and most terms remained basically unchanged for such loans to small firms.2  Meanwhile, banks reported weaker demand for C&I loans from firms of both size categories.

In addition, banks responded to a set of special questions investigating C&I lending to firms that are exposed to developments in Asia or Europe. A moderate net fraction of banks reported that they expect the quality of loans to exposed firms to deteriorate with respect to current levels over the remainder of 2019. Banks that have taken steps to mitigate risk of loan losses from such exposures reported the tightening of lending policies on new credit to exposed firms as the most frequently used action over the past year.

Banks reportedly tightened standards across all three major commercial real estate (CRE) loan categories—construction and land development loans, nonfarm nonresidential loans, and multifamily loans—over the past three months. Loan demand in all three major CRE loan categories reportedly weakened during the same period.

Banks also responded to a set of special questions about changes in lending policies and demand for CRE loans over the past year. Banks reportedly eased important lending terms, including maximum loan size, maximum loan maturity, and the spread of loan rates over their cost of funds, across all three major CRE loan categories. Most of the banks that reported reasons for easing CRE credit policies cited more aggressive competition from other banks or nonbank lenders.

For loans to households, a moderate net fraction of banks reported that standards on credit card loans tightened, on net, while their lending standards on auto loans and on most categories of residential real estate (RRE) loans remained basically unchanged. Banks reported weaker demand for almost all categories of RRE loans and for credit card loans, while demand for auto loans was basically unchanged.

Lending to Businesses

(Table 1, questions 1–12; Table 2, questions 1–8)

Questions on commercial and industrial lending. Banks reported that standards for C&I loans to both large and middle-market firms and to small firms remained basically unchanged in the first quarter. At the same time, a significant net share of banks reported narrowing interest rate spreads on loans to large and middle-market firms, and moderate net shares of banks reported easing loan covenants, increasing the maximum size, and reducing the costs of credit lines to these firms.

Almost all the banks that reported reasons for easing standards or terms on C&I loans over the past three months cited increased competition from other banks or nonbank lenders. In addition, significant fractions of banks mentioned a more favorable or less uncertain economic outlook, increased tolerance for risk, and increased liquidity in the secondary market for C&I loans as important reasons for easing.

A moderate net percentage of banks reported weaker demand for C&I loans to firms of both size categories in the first quarter, and the number of inquiries from potential borrowers reportedly declined modestly during this period.

Major net shares of banks that reported reasons for experiencing reduced C&I loan demand mentioned decreases in customers' investment in plant or equipment, decreases in customers' merger or acquisition financing needs, and customers shifting their borrowing to other sources of credit as important reasons for the weaker demand.

In contrast to the basically unchanged C&I lending standards reported by domestic banks, a modest net fraction of foreign banks reportedly tightened standards for C&I loans in the first quarter. Meanwhile, foreign banks left all terms for C&I loans basically unchanged. During the same period, foreign banks reported that demand for C&I loans and the number of inquiries from potential borrowers remained basically unchanged.

Special Questions on Commercial and Industrial Lending to Firms Exposed to Developments in Asia or Europe

(Table 1, questions 31–34; Table 2, questions 14–17)

In a set of special questions investigating C&I lending to firms that are exposed to developments in Asia or Europe, a significant fraction of banks reported that the fraction of C&I loans made to exposed firms exceeded 10 percent of their loan book. A moderate net share of banks also reported that their outlook for delinquencies and charge-offs on loans to exposed firms over the remainder of 2019 has deteriorated from current levels. A bit less than half of the banks that have taken steps to mitigate risk of loan losses from such exposures reported the tightening of lending policies on new credit to exposed firms as one of the actions adopted over the past year. Significant fractions of banks also mentioned the use of derivatives contracts and requiring additional collateral to better secure loans or credit lines to exposed firms as other important actions to mitigate risk of loan losses from exposed firms.

Among foreign bank respondents to this set of special questions, most reported that the fraction of C&I loans made to exposed firms exceeded 10 percent of their loan book, but all foreign banks reportedly expected the credit quality of loans to exposed firms to remain around current levels over the remainder of 2019. Among foreign banks reporting the importance of actions to mitigate risk of loan losses from these loans over the past year, a major fraction of banks tightened lending policies on new loans or lines of credit made to exposed firms. Meanwhile, significant fractions of banks reportedly required additional collateral to better secure loans or credit lines to exposed firms, and tightened lending policies on new loans or credit lines made to non-exposed firms, among other measures.

Questions on commercial real estate lending. A moderate net share of banks reportedly tightened standards on construction and land development loans in the first quarter, while modest net fractions of banks reportedly tightened standards for nonfarm nonresidential loans and for multifamily residential property loans. Meanwhile, a modest net fraction of foreign banks reported tightening their standards on CRE loans.

A significant net share of banks reported weaker demand for construction and land development loans in the first quarter. Meanwhile a moderate net fraction reported weaker demand for loans secured by nonfarm nonresidential properties, and a modest net fraction reported weaker demand for multifamily residential property loans. Over the same period, a modest net fraction of foreign banks reported that demand for CRE loans strengthened.

Special Questions on Changes in Banks’ Credit Policies on Commercial Real Estate Loans over the Past Year

(Table 1, questions 27–31; Table 2, questions 9–13)

A set of special questions on CRE in the April survey asked banks to consider how their credit policies and loan demand for each major CRE loan category had changed over the past year and why.

Banks reported that they had eased policies on all three major categories of CRE loans over the past year. In particular, significant net fractions of banks reportedly narrowed the spreads of loan rates over their cost of funds for nonfarm nonresidential loans and for multifamily residential property loans, while a moderate net fraction of banks reportedly narrowed the spreads for construction and land development loans. Moderate net fractions of banks increased the maximum size of loans, and modest net fractions of banks increased the length of the interest-only payment period for loans across all the main CRE loan categories.

These responses are broadly similar to the answers to the same questions in the survey that was administered a year ago, where banks also reported a net easing of several lending policies, though the net easing reported this year are, in general, a little smaller than those reported in 2018 for nonfarm nonresidential loans and a little larger than those reported in 2018 for the other two main CRE loan categories.

Banks that reportedly eased CRE credit policies over the past year cited more aggressive competition from other banks or nonbank lenders as an important reason for easing. Banks also reported a more favorable or less uncertain outlook for vacancy rates or other fundamentals on CRE properties and for property prices as important reasons for easing credit policies over the past year. Banks that reportedly tightened CRE credit policies over the past year cited reduced tolerance for risk, less favorable or more uncertain capitalization rates on CRE properties and a less favorable or more uncertain outlook for CRE property prices as important reasons for tightening.

Most banks that reportedly experienced weaker demand for CRE loans over the past year mentioned, as important reasons, decreases in customers' acquisition or development of properties, shifts of customer borrowing to other bank or nonbank sources, and less favorable or more uncertain customer outlook for rental demand. Banks that reportedly experienced stronger demand often cited declines in interest rates, increases in customers' acquisition or development of properties, and a more favorable or less uncertain customer outlook for rental demand as important reasons. Answers to these questions about demand were similar for both bank size categories.

Lending to Households

(Table 1, questions 13–26)

Questions on residential real estate lending. Banks reportedly left lending standards basically unchanged for all RRE loan categories in the first quarter, except for non-qualified mortgage (non-QM) jumbo residential mortgage loans, for which a modest net fraction of banks reportedly eased lending standards.3

Demand for all categories of closed-end RRE loans, except subprime residential mortgages, reportedly weakened, on net, over the same period. For most categories of closed-end RRE loans, including GSE-eligible and qualified mortgage (QM)-jumbo mortgages, which make up the majority of bank mortgage originations, moderate net shares of banks reported weaker demand. Meanwhile, demand was basically unchanged for subprime residential mortgages. A significant fraction of banks reported weaker demand for HELOCs.

Questions on consumer lending. A moderate net percentage of banks reported tightening lending standards on credit card loans in the first quarter, while all terms associated with credit cards were basically unchanged on net. Meanwhile, lending standards for auto loans were basically unchanged, on net, in the first quarter, and a moderate net fraction of banks reportedly increased interest rate spreads on auto loans during this period. Lending standards and terms were basically unchanged, on net, for other consumer loans in the first quarter.

Banks reported that demand for auto loans was basically unchanged, on net, in the first quarter. Meanwhile, a modest net fraction of banks reportedly experienced weaker demand for credit card loans, and a moderate net fraction of banks reported weaker demand for other consumer loans.

This document was prepared by Horacio Sapriza, with the assistance of Akber Khan, Division of Monetary Affairs, Board of Governors of the Federal Reserve System.


1. Respondent banks received the survey on March 25, 2019, and responses were due by April 5, 2019. Return to text

2. For questions that ask about lending standards or terms, “net fraction” (or “net percentage”) refers to the fraction of banks that reported having tightened (“tightened considerably” or “tightened somewhat”) minus the fraction of banks that reported having eased (“eased considerably” or “eased somewhat”). For questions that ask about loan demand, this term refers to 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”). For this summary, when standards, terms, or demand are said to have “remained basically unchanged,” the net percentage of respondent banks that reported either tightening or easing of standards or terms, or stronger or weaker demand, is greater than or equal to 0 and less than or equal to 5 percent; “modest” refers to net percentages greater than 5 and less than or equal to 10 percent; “moderate” refers to net percentages greater than 10 and less than or equal to 20 percent; “significant” refers to net percentages greater than 20 and less than 50 percent; and “major” refers to net percentages greater than or equal to 50 percent. Large and middle-market firms are defined as firms with annual sales of $50 million or more, and small firms are those with annual sales of less than $50 million. Return to text

3. The seven categories of residential home-purchase loans that banks are asked to consider are GSE-eligible, government, QM non-jumbo non-GSE-eligible, QM jumbo, non-QM jumbo, non-QM non-jumbo, and subprime. See the survey results tables that follow this summary for a description of each of these loan categories. The definition of a QM was introduced in the 2013 Mortgage Rules under the Truth in Lending Act (12 CFR Part 1026.32, Regulation Z). The standard for a QM excludes mortgages with loan characteristics such as negative amortization, balloon and interest-only payment schedules, terms exceeding 30 years, alt-A or no documentation, and total points and fees that exceed 3 percent of the loan amount. In addition, a QM requires that the monthly debt-to-income ratio of borrowers not exceed 43 percent. For more on the ability to repay and QM standards under Regulation Z, see the Consumer Financial Protection Bureau’s website at www.consumerfinance.gov/regulations/ability-to-repay-and-qualified-mortgage-standards-under-the-truth-in-lending-act-regulation-z. Return to text

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Last Update: May 06, 2019