© Reuters
Investing.com — Loan officers at major banks continued to tighten corporate lending standards in the first quarter of the year, and reported an ongoing decline in demand for loans from consumers and businesses as higher for longer interest rates bite.
About 46% of senior loan officers raised their corporate lending standards in the first quarter of 2023, according to the Fed’s April Senior Loan Officer Opinion Survey, released on Monday, that was up from 44.8% in the prior quarter.
The tightening in credit conditions persists just as businesses continued to reduce demand for loans.
Consumers, meanwhile, were also facing a higher bar to access credit across a wide category of loans including auto and real estate, though remained “basically unchanged” for credit cards, according to survey respondents.
Banks flagged a number of reasons for the increase in tighter lending conditions and reduced loan demand including “a more uncertain economic outlook, reduced tolerance for risk, deterioration in collateral values, and concerns about banks’ funding costs and liquidity positions,” according to the survey.
Looking ahead, there isn’t much optimism that tighter lending standards will ease anytime soon, with banks “expecting to tighten standards across all loan categories,” the survey showed.
The step up in the pace of tightening lending standards since the recent collapse of several banks including Silicon Valley Bank has many worried about the possibility of a credit crunch that would likely lead to a deeper and darker recession.
Source: Investing.com
