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Loan standards unchanged, but terms ease in 1Q, Loan Survey says
By Sara Rosenberg
New York, April 30 - Credit standards on commercial and industrial loans to firms of all sizes were generally unchanged during the first quarter, but moderate to large net fractions of banks did say they eased terms, according to the April Senior Loan Officer Opinion Survey on Bank Lending Practices.
Regarding terms, a large net fraction of respondents indicated that they had decreased spreads to both large and middle market firms as well as to small firms, and a sizable net fraction of banks also indicated a reduction in the use of interest rate floors and lower costs of credit lines.
Almost all domestic banks that reported having eased standards or terms on loans attributed the move to more-aggressive competition from other banks and nonbank lenders. Fewer than half of the banks said the change was due to an improved or less uncertain economic outlook.
As for demand, domestic banks reporting stronger demand for loans outnumbered those that reported weaker demand, the survey found. And, the number of inquiries from potential business borrowers regarding new or increased credit lines increased in the first quarter.
Banks said that demand improved because of shifts in borrowing from other bank and nonbank sources, as well as increases in customers' funding needs related to inventories, investment in plant or equipment, accounts receivable, and mergers and acquisitions.
Those that saw less demand cited it to an increase in their customers' internally generated funds, and decreases in customers' funding needs related to inventories, investment in plant or equipment, and accounts receivable.
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