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Enclosures
The July 2010 Senior Loan Officer Opinion Survey on Bank Lending Practices addressed
changes in the supply of, and demand for, bank loans to businesses and households over
the past three months. The survey included a set of special questions that asked
respondents about lending to European firms and their affiliates and subsidiaries. This
summary is based on responses from 57 domestic banks and 23 U.S. branches and
agencies of foreign banks. 1
The July survey indicated that, on net, banks had eased standards and terms over the
previous three months on loans in some categories, particularly those categories affected
by competitive pressures from other banks or from nonbank lenders. 2 While the survey
results suggest that lending conditions are beginning to ease, the improvement to date has
been concentrated at large domestic banks. 3 Most banks reported that demand for
business and consumer loans was about unchanged.
Domestic survey respondents reported having eased standards and most terms on C&I
loans to firms of all sizes, a move that continues a modest unwinding of the widespread
tightening that occurred over the past few years. Moreover, this is the first survey that
has shown an easing of standards on C&I loans to small firms since late 2006. 4
Significant net fractions of domestic banks also reported having eased their pricing of
C&I loans to firms of all sizes. Banks pointed to increased competition in the market for
C&I loans as an important factor behind the recent easing of terms and standards.
Demand for C&I loans from large and middle-market firms and from small firms was
reportedly little changed, on net, over the survey period after declining over the three
months prior to the April survey.
On net, large domestic banks reported having easing standards and terms on almost all of
the different categories of loans to households. Other banks showed either smaller net
fractions having eased lending policies or a net tightening of lending policies. Regarding
residential real estate lending, a few large banks reported having eased standards on
prime mortgage loans, while a modest net fraction of the remaining banks reported
having tightened standards on such loans. Banks reported an increased willingness to
make consumer installment loans, on balance, for the third consecutive quarter, and small
net fractions of banks reported having eased standards on both credit card and other
1
Respondent banks received the survey on or after July 13, 2010, and responses were due by July 27,
2010.
2
For questions that ask about lending standards or terms, reported net percentages equal the percentage
of banks that reported having tightened standards ("tightened considerably" or "tightened somewhat")
minus the percentage of banks that reported having eased standards ("eased considerably" or "eased
somewhat"). For questions that ask about demand, reported net fractions equal the percentage of banks that
reported stronger demand ("substantially stronger" or "moderately stronger") minus the percentage of banks
that reported weaker demand ("substantially weaker" or "moderately weaker").
3
Large banks are defined as banks with assets greater than $20 billion as of March 31, 2010.
4
Small firms are generally defined as firms with annual sales of less than $50 million.
2 Senior Loan Officer Opinion Survey
Business Lending
(Table 1, questions 1-14, 25; Table 2, questions 1-15)
Questions on commercial and industrial lending. The results of the July survey
indicated that a modest net fraction of domestic respondents had eased standards for
lending to large and middle-market firms over the previous three months—the second
consecutive survey showing such an easing. For the first time since 2006, banks reported
having eased their lending standards on C&I loans to small firms. In particular, around
one-fifth of large domestic banks reported having eased lending standards for small
firms, which offset a net tightening of standards by a small fraction of other banks.
Many banks indicated that they had eased terms on C&I loans, with especially sizable net
fractions of domestic banks reporting that they had reduced spreads of loan rates over
their bank’s cost of funds and had trimmed the costs of credit lines. On net, large
domestic banks had eased each of the seven surveyed loan terms for firms of all sizes.
Other domestic banks reported a net easing of the spread of loan rates over their own cost
of funds and of the costs associated with credit lines, but small net fractions of those
banks had increased premiums for riskier borrowers and had tightened the majority of
nonprice loan terms, particularly loan covenants. Domestic banks also reported that they
had stopped reducing the size of existing credit lines for commercial and industrial firms,
on net—the first time that banks had not reported cutting such lines since these questions
were added to the survey in January 2009.
Nearly all of the respondents that reported having eased standards or terms on C&I loans
cited more aggressive competition from other banks or nonbank lenders (other financial
intermediaries or the capital markets) as an important reason for doing so, and about one-
half of the respondents that eased pointed to a more favorable or less uncertain economic
outlook. Respondents that had tightened lending policies—primarily smaller banks in the
sample—generally attributed the move to a less favorable or more uncertain economic
outlook, rather than bank-specific factors such as concerns about their capital or liquidity
positions.
On balance, demand for C&I loans from large and middle-market firms and from small
firms changed little in the July survey. In the April survey, banks had reported weaker
demand from firms of all sizes. A shift in customer borrowing to their bank from other
credit sources and customers’ increased financing needs for inventory and receivables
were the most common reasons cited in the current survey by banks that had experienced
higher loan demand. The net percentage of respondents that pointed to customers’
increased investment in plant or equipment as an important reason for stronger demand
for C&I loans also edged up relative to the April survey.
In the July survey, U.S. branches and agencies of foreign banks reported that their
standards for approving C&I loans had remained basically unchanged, after having
3 Board of Governors of the Federal Reserve System
reported a net easing of such standards in April. Small net fractions of foreign
respondents still reported having eased most loan terms in the current survey, but the
reported easing was much less widespread than in the April survey. Moreover, branches
and agencies had tightened premiums charged on riskier loans, on balance. A modest net
fraction of branches and agencies of foreign banks reported that demand had been
stronger over the previous three months.
Special questions on lending to European firms and their affiliates and subsidiaries.
A set of special questions asked respondents about lending to firms headquartered in
Europe—both nonfinancial companies and banks, as well as their affiliates and
subsidiaries. Only about 22 of the 57 domestic respondents indicated that they made
loans or extended credit lines to European firms. While only small net percentages of
domestic and foreign respondents indicated that their standards and terms on loans to
European nonfinancial companies had tightened, somewhat larger net fractions indicated
that they had tightened their policies for lending to European banks. Both domestic and
foreign respondents indicated, on net, almost no change in demand for loans from
European firms or their affiliates or subsidiaries. However, modest net percentages of
respondents of both types reported that the number of inquiries regarding the availability
of new or increased lines of credit from European borrowers had risen over the past three
months.
Questions on commercial real estate lending. In the July survey, most respondents
reported no change in their bank’s standards for approving commercial real estate loans.
The net percentage of banks that reported that their standards had tightened was small,
and it dropped slightly relative to the April survey. Overall, the net fraction of banks that
reported that demand for CRE loans had decreased continued to be small.
Lending to Households
(Table 1, questions 15-25)
Questions on residential real estate lending. On net, a small fraction of domestic banks
reported having eased standards on prime residential mortgage loans; the few respondents
that had eased standards were all large banks. The increase in demand over the past few
months for prime residential mortgage loans reported by several respondents to the
current survey marked a reversal of the net weakening of demand for such loans reported
in the April survey. Fewer than one-half of survey respondents indicated that their bank
originated nontraditional mortgage loans. Of these respondents, nearly all reported no
change in their bank’s standards for extending such loans. The small number of banks
that reported an increase in demand for nontraditional mortgage loans balanced the
number of banks that reported a decrease in demand. In the April survey, one-third of
banks, on net, reported that demand for nontraditional mortgage loans had weakened.
A small share of respondents reported that their bank’s standards for approving home
equity lines of credit (HELOCs) had eased over the past three months. However, a
similar fraction of respondents indicated that they had decreased the size of HELOCs for
4 Senior Loan Officer Opinion Survey
existing customers over the same period. A small net percentage of banks reported that
demand for HELOCs had weakened, on net, down sharply from the April survey.
Indicators of changes in standards and terms for approving applications for credit card
loans were mixed. A few banks reported having eased standards, but small net fractions
of respondents indicated that they had tightened terms and conditions on credit card
accounts. Moreover, a small fraction of banks, on net, reported having reduced the size
of credit card lines for existing customers, though that fraction has decreased noticeably
over the past few surveys. Large banks reported a net easing of terms on credit card
loans, while other banks reported a net tightening.
On balance, a small percentage of respondents indicated that demand for consumer loans
of all types had weakened. A modest net percentage of large banks reported an increase
in demand for the second consecutive quarter, but a slightly larger net percentage of other
banks reported a decrease in such demand.
This document was prepared by Mary Beth Chosak with the assistance of Thomas Spiller,
Division of Monetary Affairs, Board of Governors of the Federal Reserve System.
Measures of Supply and Demand for Commercial and Industrial Loans,
by Size of Firm Seeking Loan
Net Percentage of Domestic Respondents Tightening Standards for Commercial and Industrial Loans
Percent
Apr. 100
survey
80
Loans to large and medium-sized firms
Loans to small firms 60
40
20
-20
-40
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Net Percentage of Domestic Respondents Increasing Spreads of Loan Rates over Banks’ Costs of Funds
Percent
100
80
60
40
20
-20
-40
-60
-80
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Net Percentage of Domestic Respondents Reporting Stronger Demand for Commercial and Industrial Loans
Percent
60
40
20
-20
-40
-60
-80
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Measures of Supply and Demand for Commercial Real Estate Loans
Net Percentage of Domestic Respondents Tightening Standards for Commercial Real Estate Loans
Percent
Apr. 100
survey
80
60
40
20
-20
-40
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Net Percentage of Domestic Respondents Reporting Stronger Demand for Commercial Real Estate Loans
Percent
60
40
20
-20
-40
-60
-80
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Measures of Supply and Demand for Residential Mortgage Loans
Net Percentage of Domestic Respondents Tightening Standards for Residential Mortgage Loans
Percent Percent
100 100
80 80
60 60
40 40
All residential
20 20
0 0
Prime
Nontraditional
-20 -20
Subprime
Note: For data starting in 2007:Q2, changes in standards for prime, nontraditional, and subprime mortgage loans are reported separately.
Series are not reported when the number of respondents is 3 or fewer.
Net Percentage of Domestic Respondents Reporting Stronger Demand for Residential Mortgage Loans
Percent Percent
80 80
Prime
60 All residential 60
Nontraditional
Subprime
40 40
20 20
0 0
-20 -20
-40 -40
-60 -60
-80 -80
Note: For data starting in 2007:Q2, changes in demand for prime, nontraditional, and subprime mortgage loans are reported separately.
Series are not reported when the number of respondents is 3 or fewer.
Measures of Supply and Demand for Consumer Loans
60
Credit card loans
Other consumer loans 40
20
-20
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Net Percentage of Domestic Respondents Reporting Increased Willingness to Make Consumer Installment Loans
Percent
40
20
-20
-40
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Net Percentage of Domestic Respondents Reporting Stronger Demand for Consumer Loans
Percent
60
40
20
-20
-40
-60
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Table 1
1. Over the past three months, how have your bank's credit standards for approving applications for C&I loans or
credit lines—other than those to be used to finance mergers and acquisitions—to large and middle-market firms
and to small firms changed? (If your bank defines firm size differently from the categories suggested below,
please use your definitions and indicate what they are.)
A. Standards for large and middle-market firms (annual sales of $50 million or more):
2. For applications for C&I loans or credit lines—other than those to be used to finance mergers and
acquisitions—from large and middle-market firms and from small firms that your bank currently is willing to
approve, how have the terms of those loans changed over the past three months?
A. Terms for large and middle-market firms (annual sales of $50 million or more):
d. Spreads of loan rates over your bank's cost of funds (wider spreads=tightened, narrower
spreads=eased)
f. Loan covenants
g. Collateralization requirements
g. Collateralization requirements
A. Demand for C&I loans from large and middle-market firms (annual sales of $50 million or more):
B. Demand for C&I loans from small firms (annual sales of less than $50 million):
f. Customer borrowing shifted to your bank from other bank or nonbank sources because these other
sources became less attractive
f. Customer borrowing shifted from your bank to other bank or nonbank credit sources because these
other sources became more attractive
7. Over the past three months, how have your bank's credit standards and terms for approving applications for
C&I loans or credit lines—other than those to be used to finance mergers and acquisitions—from nonfinancial
companies headquartered in Europe and their affiliates and subsidiaries changed?
For this question, 31 respondents answered “My bank does not make C&I loans or extend credit
lines to nonfinancial companies headquartered in Europe or their affiliates or subsidiaries.”
8. Over the past three months, how have your bank's credit standards and terms for approving applications for
loans or credit lines—other than those to be used to finance mergers and acquisitions—from banks headquartered
in Europe and their affiliates and subsidiaries changed?
For this question, 31 respondents answered “My bank does not make loans or extend credit lines to
banks headquartered in Europe or their affiliates or subsidiaries.”
9. Apart from normal seasonal variation, how has demand for C&I loans from nonfinancial companies
headquartered in Europe and their affiliates and subsidiaries changed over the past three months? (Please
consider only funds actually disbursed as opposed to requests for new or increased lines of credit.)
For this question, 32 respondents answered “My bank does not make C&I loans to nonfinancial
companies headquartered in Europe or their affiliates or subsidiaries.”
10. Apart from normal seasonal variation, how has demand for loans from banks headquartered in Europe and
their affiliates and subsidiaries changed over the past three months? (Please consider only funds actually
disbursed as opposed to requests for new or increased lines of credit.)
For this question, 33 respondents answered “My bank does not make loans to banks headquartered
in Europe or their affiliates or subsidiaries.”
11. At your bank, how has the number of inquiries from nonfinancial companies headquartered in Europe and
their affiliates and subsidiaries regarding the availability and terms of new credit lines or increases in existing
lines changed over the past three months? (Please consider only inquiries for additional or increased C&I lines as
opposed to the refinancing of existing loans.)
For this question, 32 respondents answered “My bank does not extend credit lines to nonfinancial
companies headquartered in Europe or their affiliates or subsidiaries.”
12. At your bank, how has the number of inquiries from banks headquartered in Europe and their affiliates and
subsidiaries regarding the availability and terms of new credit lines or increases in existing lines changed over
the past three months? (Please consider only inquiries for additional or increased lines as opposed to the
refinancing of existing loans.)
For this question, 31 respondents answered “My bank does not extend credit lines to banks
headquartered in Europe or their affiliates or subsidiaries.”
Questions 13-14 ask about commercial real estate (CRE) loans at your bank, including construction and land
development loans and loans secured by nonfarm nonresidential real estate. Question 13 deals with changes in
your bank's standards over the past three months. Question 14 deals with changes in demand. If your bank's
lending standards or terms have not changed over the relevant period, please report them as unchanged even if
they are either restrictive or accommodative relative to longer-term norms. If your bank's standards or terms
have tightened or eased over the relevant period, please so report them regardless of how they stand relative to
longer-term norms. Also, please report changes in enforcement of existing standards as changes in standards.
13. Over the past three months, how have your bank's credit standards for approving applications for CRE loans
changed?
14. Apart from normal seasonal variation, how has demand for CRE loans changed over the past three months?
For the purposes of this survey, please use the following definitions of these loan categories (note that the loan
categories are not mutually exclusive) and include first-lien loans only:
The prime category of residential mortgages includes loans made to borrowers that typically had
relatively strong, well-documented credit histories, relatively high credit scores, and relatively low debt-
to-income ratios at the time of origination. This would include fully amortizing loans that have a fixed
rate, a standard adjustable rate, or a common hybrid adjustable rate—those for which the interest rate is
initially fixed for a multi-year period and subsequently adjusts more frequently.
The nontraditional category of residential mortgages includes, but is not limited to, adjustable-rate
mortgages with multiple payment options, interest-only mortgages, and ``Alt-A'' products such as
mortgages with limited income verification and mortgages secured by non-owner-occupied properties.
(Please exclude standard adjustable-rate mortgages and common hybrid adjustable-rate mortgages.)
The subprime category of residential mortgages typically includes loans made to borrowers that displayed
one or more of the following characteristics at the time of origination: weakened credit histories that
include payment delinquencies, chargeoffs, judgments, and/or bankruptcies; reduced repayment capacity
as measured by credit scores or debt-to-income ratios; or incomplete credit histories.
15. Over the past three months, how have your bank's credit standards for approving applications from
individuals for mortgage loans to purchase homes changed?
A. Credit standards on mortgage loans that your bank categorizes as prime residential mortgages have:
For this question, 33 respondents answered “My bank does not originate nontraditional residential
mortgages.”
C. Credit standards on mortgage loans that your bank categorizes as subprime residential mortgages have:
A. Demand for mortgages that your bank categorizes as prime residential mortgages was:
B. Demand for mortgages that your bank categorizes as nontraditional residential mortgages was:
For this question, 33 respondents answered “My bank does not originate nontraditional residential
mortgages.”
C. Demand for mortgages that your bank categorizes as subprime residential mortgages was:
17. Over the past three months, how have your bank's credit standards for approving applications for revolving
home equity lines of credit changed?
18. Apart from normal seasonal variation, how has demand for revolving home equity lines of credit changed
over the past three months? (Please consider only funds actually disbursed as opposed to requests for new or
increased lines of credit.)
19. Please indicate your bank's willingness to make consumer installment loans now as opposed to three months
ago.
20. Over the past three months, how have your bank's credit standards for approving applications for credit cards
from individuals or households changed?
a. Credit limits
b. Spreads of interest rates charged on outstanding balances over your bank's cost of funds (wider
spreads=tightened, narrower spreads=eased)
e. The extent to which loans are granted to some customers that do not meet credit scoring
thresholds (increased=eased, decreased=tightened)
a. Maximum maturity
b. Spreads of loan rates over your bank's cost of funds (wider spreads=tightened, narrower
spreads=eased)
e. The extent to which loans are granted to some customers that do not meet credit scoring
thresholds (increased=eased, decreased=tightened)
1. The sample is selected from among the largest banks in each Federal Reserve District. In the table, large banks
are defined as those with total domestic assets of $20 billion or more as of March 31, 2010. The combined assets
of the 30 large banks totaled $6.7 trillion, compared to $7.0 trillion for the entire panel of 57 banks, and 10.5
trillion for all domestically chartered, federally insured commercial banks.
Table 2
1. Over the past three months, how have your bank's credit standards for approving applications for C&I loans
or credit lines—other than those to be used to finance mergers and acquisitions—changed?
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
d. Spreads of loan rates over your bank's cost of funds (wider spreads=tightened, narrower
spreads=eased)
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
g. Collateralization requirements
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
5. If demand for C&I loans has strengthened or weakened over the past three months (as described in question
4), how important have been the following possible reasons for the change?
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
7. Over the past three months, how have your bank's credit standards and terms for approving applications for
C&I loans or credit lines—other than those to be used to finance mergers and acquisitions—from nonfinancial
companies headquartered in Europe and their affiliates and subsidiaries changed?
All Respondents
Banks Percent
For this question, 7 respondents answered “My bank does not make C&I loans or extend credit
lines to nonfinancial companies headquartered in Europe or their affiliates or subsidiaries.”
8. Over the past three months, how have your bank's credit standards and terms for approving applications for
loans or credit lines—other than those to be used to finance mergers and acquisitions—from banks
headquartered in Europe and their affiliates and subsidiaries changed?
All Respondents
Banks Percent
For this question, 9 respondents answered “My bank does not make loans or extend credit lines to
banks headquartered in Europe or their affiliates or subsidiaries.”
9. Apart from normal seasonal variation, how has demand for C&I loans from nonfinancial companies
headquartered in Europe and their affiliates and subsidiaries changed over the past three months? (Please
consider only funds actually disbursed as opposed to requests for new or increased lines of credit.)
All Respondents
Banks Percent
For this question, 7 respondents answered “My bank does not make C&I loans to nonfinancial
companies headquartered in Europe or their affiliates or subsidiaries.”
10. Apart from normal seasonal variation, how has demand for loans from banks headquartered in Europe and
their affiliates and subsidiaries changed over the past three months? (Please consider only funds actually
disbursed as opposed to requests for new or increased lines of credit.)
All Respondents
Banks Percent
For this question, 7 respondents answered “My bank does not make loans to banks headquartered in
Europe or their affiliates or subsidiaries.”
11. At your bank, how has the number of inquiries from nonfinancial companies headquartered in Europe and
their affiliates and subsidiaries regarding the availability and terms of new credit lines or increases in existing
lines changed over the past three months? (Please consider only inquiries for additional or increased C&I lines
as opposed to the refinancing of existing loans.)
All Respondents
Banks Percent
For this question, 7 respondents answered “My bank does not extend credit lines to nonfinancial
companies headquartered in Europe or their affiliates or subsidiaries.”
12. At your bank, how has the number of inquiries from banks headquartered in Europe and their affiliates and
subsidiaries regarding the availability and terms of new credit lines or increases in existing lines changed over
the past three months? (Please consider only inquiries for additional or increased lines as opposed to the
refinancing of existing loans.)
All Respondents
Banks Percent
For this question, 8 respondents answered “My bank does not extend credit lines to banks
headquartered in Europe or their affiliates or subsidiaries.”
Questions 13-14 ask about commercial real estate (CRE) loans at your bank, including construction and land
development loans and loans secured by nonfarm nonresidential real estate. Question 13 deals with changes in
your bank's standards over the past three months. Question 14 deals with changes in demand. If your bank's
lending standards or terms have not changed over the relevant period, please report them as unchanged even if
they are either restrictive or accommodative relative to longer-term norms. If your bank's standards or terms
have tightened or eased over the relevant period, please so report them regardless of how they stand relative to
longer-term norms. Also, please report changes in enforcement of existing standards as changes in standards.
13. Over the past three months, how have your bank's credit standards for approving applications for CRE loans
changed?
All Respondents
Banks Percent
14. Apart from normal seasonal variation, how has demand for CRE loans changed over the past three months?
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
All Respondents
Banks Percent
1. As of March 31, 2010, the 23 respondents had combined assets of $1.0 trillion, compared to $1.9 trillion for
all foreign related banking institutions in the United States. The sample is selected from among the largest
foreign-related banking institutions in those Federal Reserve Districts where such institutions are common.