Credit standards for consumer and business loans tightened during the first quarter of 2023, with weaker demand reported across all loan categories, according to the Federal Reserve. Senior Loan Officer Opinion Survey released today. Banks reported that they expected credit standards to tighten across all loan categories during the remainder of the year. As for the reasons for the tightening, many banks expected a deterioration in the credit quality of their loan portfolios and in the values ​​of customer collateral, a reduction in risk tolerance, and concerns about bank financing costs, bank liquidity positions and deposit outflows.

C&I. Significant net percentages of banks (20-50%) reported tightening standards for C&I lending to businesses of all sizes. Banks also reported tightening all questionable terms on C&I loans to businesses of all sizes during the first quarter. The tightening was most widely reported in premiums charged on riskier loans, loan rate spreads over cost of funds and credit line costs. In addition, a significant net share of banks reported tightening maximum credit line sizes, loan agreements, and collateral requirements for businesses of all sizes.

BELIEVE. Banks’ top net holdings (over 50%) reported stricter rules for all types of CRE loans. Such tightening was more widely reported by midsize banks than by larger or other banks. Meanwhile, major net bank stocks reported weaker demand for loans secured by non-agricultural non-residential properties, loans for construction and land development, and loans secured by multi-family properties.

mortgages. Lending standards have been tightened for most categories of residential real estate loans and for HELOCs. A significant net share of banks reported stricter standards for subprime, HELOC, and non-QM jumbo mortgages, while a moderate net share reported stricter standards on QM jumbo, non-QM, non-jumbo, and non-jumbo QM, ineligible. for GSE Mortgages In general, banks reported that the standards were basically unchanged for government and GSE-eligible residential mortgages. Meanwhile, major net bank shares reported weaker demand for all residential non-government, non-jumbo QM, GSE-ineligible, and HELOC loans, for which major net bank shares reported weaker demand. weak.

personal loans. Major net actions by banks reported tightening credit standards for credit cards, auto and other consumer loans. In keeping with the stricter standards for credit card loans, banks also reported tightening nearly all questionable terms on credit card loans. Specifically, a significant net share of banks reported an increase in minimum credit score requirements and a decrease in credit limits, while a moderate net share reported a decrease in the extent to which they make loans to some customers who do not meet credit rating thresholds and a widening of interest rate ranges charged on balances. .

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