U.S. banks seem willing to start lending again but only to
'safest' borrowers, according to the Senior Loan Officer Survey
on Bank Lending Practices for the month of April, released by the
19% of the survey respondents said that they have '
lending standards for large and middle-market firms, while
about 81% said that standards remained unchanged. The number was
slightly more positive for small firms, with 23% of the
respondents reporting easing of standards. Many banks cited
" for business loans as the main reason for easing their
However mortgage lending standards to individual borrowers
remained more or less unchanged, while the demand for prime
mortgages continued to pick up. A few banks reported having
eased their standards on prime residential mortgages but the
standards for nontraditional mortgages were little changed.
odest net fraction of banks were more likely to approve an
application with a FICO score of 720 and a 20% down payment… but
modest to moderate net fractions of banks indicated that they
were currently less likely to approve such loan applications with
a FICO score of 620, depending on the down payment
Light tending standards have been hurting the recovery since
many prospective borrowers can not take advantage of low interest
rates. At the end of 2012, banks had l
t less than 70% of their deposits (a multi-decade low), down from
93% just before the financial crisis.
While it is true that loose lending standards were partly
responsible for the financial crisis, many banks still remain
reluctant to lend to creditworthy borrowers (but with less than
Do you think that banks' unwillingness to lend more remains a
headwind to economic recovery?
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