To Lend or Not To Lend
In early February, the Federal Reserve released its January 2016 Senior Loan Officer (SLO) Opinion Survey. The survey focuses on banks’ outlook for lending practices and conditions as well as their outlook for credit quality. The results include responses from 73 domestic banks and 24 U.S. branches of foreign banks.
Key take-a-ways related to Commercial Lending:
- A majority of banks where either unchanged or tightened lending standards, continuing the trend reported in the Q3 2015 survey, with slightly higher percentage of banks reporting tightening in Q4 2015.
- The primary drivers for net tightening were a less favorable economic outlook as well as heightened concerns surrounding industry-specific issues.
- Banks expect standards to tighten and interest rates charged to increase in 2016.
Key take-a-ways related to Consumer Lending:
- Lending standards for credit card loans were flat while lending standards eased for auto loans.
- Demand for consumer loans remained near unchanged during Q4 2015.
- Banks indicated that they expected to ease standards on residential mortgage loans over 2016 and that credit losses on subprime auto loans will increase in 2016.
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