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Fed survey: Banks report less tolerance for risk in Q3
The Federal Reserve’s October senior loan officer opinion survey (SLOOS) on bank lending practices examined changes in the standards and terms on demand for bank loans to businesses and households generally corresponding to the third quarter of 2023. According to the survey, banks reported tightened lending standards and weaker demand across categories.
The survey also included two sets of special questions, including one about banks’ likelihood to approve credit card and auto loan applications by borrower FICO score in comparison to earlier in the year. Banks reported that they were less likely to approve such loans for borrowers with FICO scores of 620 and 680 in comparison with the beginning of the year, while they were more likely to approve credit card loan applications and about as likely to approve auto loan applications for borrowers with FICO scores of 720 over this same period.
In response to the second set of special questions about banks' reasons for changing standards for all loan categories in the third quarter, banks most frequently cited a less favorable or more uncertain economic outlook, reduced tolerance for risk, deterioration in the credit quality of loans and collateral values, and concerns about funding costs.
A few key findings from the survey:
- survey respondents reported, on balance, tighter standards and weaker demand for commercial and industrial (C&I) loans to firms of all sizes over the third quarter, as well as tighter standards and weaker demand for all commercial real estate (CRE) loan categories;
- banks reported that lending standards tightened across all categories of residential real estate (RRE) loans other than government residential mortgages, for which standards remained basically unchanged, and demand weakened for all RRE loan categories;
- banks reported tighter standards and weaker demand for home equity lines of credit (HELOCs); and
- standards tightened for all consumer loan categories and demand weakened on balance.
The Fed received responses from 62 domestic banks and 19 U.S. branches and agencies of foreign banks. The survey was received Sept. 25, with responses due Oct. 5.
Access the full survey from the Fed. See NAFCU's recent economic analysis reports.