Banks Tighten Standards for Business Loans

Banks were a bit more cautious about lending to businesses in the last three months, but there was still plenty of money available to qualified borrowers, the Federal Reserve said. At the same time, consumer demand for credit, particularly for home mortgages, declined, reflecting higher interest rates, according to a Fed survey of loan officers from 55 large domestic banks and 21 U.S. branches of foreign banks. About 9% of U.S banks polled said they had tightened standards for commercial and industrial loans to large and mid-size companies, up from 5% in the previous survey released in August. Such tighter lending practices were more pronounced at U.S. branches of foreign banks, the latest survey found. On the consumer side, 41% of banks reported weaker demand for home mortgages over the last three months, up from 35% in the previous survey. Meanwhile, 8% of the banks reported a decrease in demand for consumer loans; in August, 10% reported an increase. The Federal Reserve raised interest rates three times this year--in June, August and November--increasing borrowing costs.