Sunday, January 10, 2010

Latest FRB Senior Loan Officer Opinion Survey Shows Continuing Improvement in Business Lending Conditions

The Federal Reserve Board October 2009 Senior Loan Officer Opinion Survey reflects continued improvement in loan demand and loosening of loan standards, for businesses of all sizes. The loan standards category includes pricing, maximum maturity, amount of credit lines, and loan covenants. Banks continue to have little tolerance for risk and are closely monitoring economic conditions in their geographic regions. Loan demand by businesses remains slow as a result of depressed sales and high unemployment. (Double click on image to enlarge.)

Although demand is beginning to improve, C&I and CRE outstanding balances fell month over month throughout 2009. Data from the Federal Reserve’s weekly sampling of 875 commercial banks for C&I and CRE outstanding balances shows an overall decline of 10.7% for 2009. During 2009, CRE loans declined 6%, while C&I loans declined almost 16%.

With the unemployment rate stuck in double-digits, I believe it will be several more months before business borrowing picks up substantially. For the economy’s sake, I hope I’m wrong.

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