Banks reported tighter standards, and weaker demand, for commercial and industrial (C&I) loans to all sizes of firms in the third quarter, the Federal Reserve said Monday in reporting results of a lending survey.
The Fed said that its October 2023 Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) said the results were based on conditions over the last three months, which mostly corresponded to the third quarter of the year.
The survey results also showed, the Fed said, banks reported tighter standards and weaker demand for all commercial real estate (CRE) loan categories.
For households, the SLOOS reported, lending standards tightened across all categories of residential real estate (RRE) loans other than government residential mortgages. The reported noted that standards for those loans remained basically unchanged.
Demand weakened for all RRE loan categories, the SLOOS reported. The survey said banks reported tighter standards and weaker demand for home equity lines of credit (HELOCs).
For credit card, auto, and other consumer loans, standards reportedly tightened, and demand weakened on balance, the report stated.
Additionally, this edition of the SLOOS contained special questions about their likelihood of approving credit card and auto loan applications by borrower FICO score (or equivalent) over the three-month period in comparison with the beginning of the year, and banks’ reasons for changing standards for all loan categories in the third quarter of 2023.
On the credit scores, banks reported that they were less likely to approve credit card and auto loans for borrowers with FICO scores of 620 and 680 in comparison with the beginning of the year. The banks reported they were more likely to approve credit card loan applications and about as likely to approve auto loan applications for borrowers with FICO scores of 720 over this same period.
On tightening lending standards in the third quarter, banks reported that they most frequently cited a less favorable or more uncertain economic outlook; reduced tolerance for risk; deterioration in the credit quality of loans and collateral values; and concerns about funding costs as important reasons for over the third quarter.
The October 2023 Senior Loan Officer Opinion Survey on Bank Lending Practices