Lending policies ease, demand on the rise, April Loan Survey finds

By Sara Rosenberg

New York, May 5 - Lending policies generally eased and demand was stronger for commercial and industrial loans over the past three months, according to the April 2014 Senior Loan Officer Opinion Survey on Bank Lending Practices.

Overall, a small net percentage of domestic survey respondents reported having eased standards on loans to firms of all sizes and larger fractions of banks reported easing terms, with a reduction in spreads being the most widespread term to be eased.

Additionally, banks said they had reduced the cost of credit lines, decreased the use of interest rate floors, eased loan covenants and reduced risk premiums.

All respondents that reported easing standards and/or terms on loans said that more-aggressive competition from other banks or nonbank lenders was an important reason for having done so. A smaller numbers of banks also cited a more favorable or less uncertain economic outlook and increased tolerance for risk as reasons for the changes.

Regarding demand, slightly more banks reported seeing stronger demand than weaker demand from firms of all sizes, the survey said.

The reason given for the stronger demand was a wide range of customers' financing needs, particularly those related to inventories, accounts receivable, investment in plant or equipment, and mergers or acquisitions.

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