Monday, November 07, 2011

Fed: Banks Tighten Lending Standards to Banks and Firms with European Exposures

by Bill McBride on 11/07/2011 02:17:00 PM

The Federal Reserve released the quarterly October 2011 Senior Loan Officer Opinion Survey on Bank Lending Practices today. The survey had a special question on lending to European banks and firms. With regards to banks, the tightening was "considerable", however to European firms the tightening was "moderage":

About one-half of the domestic bank respondents, mostly large banks, indicated that they make loans or extend credit lines to European banks or their affiliates or subsidiaries, and about two-thirds of the foreign respondents indicated the same. Among those domestic and foreign respondents, a large share--about two-thirds--reported having tightened standards on loans to European banks over the third quarter. Many domestic banks indicated that the tightening was considerable.

About three-fifths of the domestic respondents, mostly large banks, and all foreign respondents indicated that they make loans or extend credit lines to nonfinancial firms that have operations in the United States and significant exposures to European economies. Among those domestic and foreign respondents, a moderate fraction indicated that they had tightened standards on C&I loans to such firms.
On the U.S. Commercial and Industrial (C&I):
A small net fraction of domestic banks reported having eased standards on C&I loans during the third quarter, in contrast to more widespread reports of such easing in previous quarters. This moderate net reduction in easing was concentrated in loans to large and middle-market firms rather than in loans to smaller firms. ... Reports of weaker demand for C&I loans outnumbered reports of stronger demand in a reversal from recent quarters, particularly with respect to demand from large and middle-market firms.
For Commercial Real Estate:
Domestic banks continued to report little change in their standards on CRE loans, which were widely described in a special question in the previous survey as being at or near their tightest levels since 2005. In contrast, a large fraction of foreign respondents reported having tightened standards on CRE loans, in a substantial shift from the net easing reported by those institutions in the prior two surveys.
And on consumer lending:
Modest fractions of banks reported having eased standards on consumer credit card loans and on other non-auto loans. As in the previous survey, somewhat larger fractions of banks reported having eased standards on auto loans.
There are several charts here.

So far the European financial crisis hasn't led to tighter lending standards in the U.S., but standards are already pretty tight.