The U.S. Federal Reserve Board has released its quarterly Senior Loan Officer Opinion Survey on Bank Lending Practices for July 2012, which shows an increase in demand for commercial and industrial loans, while lending standards for such loans have slightly eased.
Commercial lending standards appear to have eased for mid- to large-size firms, but not for smaller firms, according to the survey. Perhaps not coincidentally, loan demand from mid- to large-size firms increased, while loan demand from small firms remained unchanged. Demand for commercial real estate loans also seems to be on the rise. Some banks reported easing standards for commercial real estate loans, but not as many as had reported easing standards for commercial and industrial loans.
Standards for home loans remained unchanged, with some tightening of standards for nontraditional loans. Demand for prime mortgages strengthened over the past three months. Auto loan demand increased during the quarter, and many banks reported easing standards for both auto and credit card loans.
The July survey also contained three sets of special questions: ?The first set asked banks about lending to, and competition from, European banks; the second set asked about the revised Home Affordable Refinance Program (HARP 2.0); and the third set repeated a number of special questions from one year ago on the current level of standards relative to their range since 2005 for a broad variety of loan categories.
Not surprisingly, many banks reported tightening standards on loans to banks headquartered in Europe. Given the ongoing turmoil over sovereign debt in Europe, even money market funds have been pulling back. Interestingly, many banks reported receiving more business due to customers shying away from European banks.
It seems that HARP 2.0 has resulted in a mini mortgage refinancing boom over the last three months. Most banks expect that more than 60 percent of HARP applications will be approved and completed.? However, a significant number of banks also reported that several factors are keeping them from fully participating in the program.
Finally, despite the recent easing, lending standards across many categories remained tighter than historical averages.
A PDF of the full survey may be viewed by clicking the following link: July 2012 Senior Loan Officer Opinion Survey on Bank Lending Practices.
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