Loan standards ease over the course of a year, OCC survey finds

By Sara Rosenberg

New York, Nov. 9 - Commercial loan standards eased over the past year especially in structured finance and syndicated/national loans, areas that over the four prior years had shown the greatest tightening, according to a survey conducted by the Office of the Comptroller of the Currency.

Of those surveyed, 13% of banks eased standards, 12% tightened and 75% did not change standards. By comparison, in 2003, 47% of banks tightened standards and 5% eased.

"It is not surprising to find some adjustments to underwriting criteria due to improved loan portfolio quality, stepped-up competition and a more optimistic economic outlook," said Barbara Grunkemeyer, Deputy Comptroller for Credit Risk, in a news release. "However, ambitious growth goals in a highly competitive market can create an environment that fosters imprudent credit decisions.

"We are seeing that the products that have experienced the most easing are the same products that experienced the most volatility during the recent credit cycle. Banks need to be disciplined and adhere to the enhanced credit risk management practices they implemented in the past few years."

The survey included the 72 largest national banks, meaning they have assets of $2 billion or greater, and covered the 12-month period ending March 31. The total loan portfolio of the surveyed banks was approximately $2.3 trillion, representing 91% of all outstanding loans in national banks.

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