Lending Conditions Tighten (But Less than Expected)

The recently released results of the Federal Reserve Board’s quarterly Senior Loan Officer Opinion Survey (SLOOS) show some tightening of lending conditions in the first quarter of 2019. While many banks reported that their standards in approving applications for credit cards from individuals or households tightened somewhat, overall, the tightening was not as much as they had anticipated, when they were asked about their outlook for 2019 in the fourth quarter of 2018’s survey. The tightening of credit standards is consistent with the Federal Reserve’s data on Consumer Credit, which, in part, show a decrease in revolving debt from the previous month.

In the previous quarter’s survey (for the fourth quarter of 2018), banks were asked a specialized set of questions about their outlook for 2019, in which 11- to 12% of banks reported a likelihood of tightening standards to both large- and middle-market firms1 for Commercial and Industrial (C&I) loans. For Commercial Real Estate (CRE) loans, 25% of banks said that they would tighten their standards in approving applications across all loan categories (small-, middle-, and large-market firms). In this quarter, we can see if banks actually were as stringent in 2019, thus far, as they thought they would be: for C&I loans for large- to middle-market firms, only 3 out of the 71 banks surveyed said that they tightened standards somewhat in approving applications while the rest of the banks, in this area, either remained unchanged or eased somewhat. For CRE loans made to large- to middle-market firms, 13% to 19% of banks reported that they tightened standards somewhat. The percentage of banks’ reporting somewhat tightening varied depending on the type of CRE loan2.


1. Denoting those firms with sales over $50 million.

2. The three categories of CRE loans are: construction and land development loans; loans secured by nonfarm nonresidential properties; and loans secured by multifamily residential properties



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