• According to the Federal Reserve’s senior loan officer survey, US banks eased lending standards further in the three months up to mid July and demand continued to strengthen.

  • Developments in bank lending standards and credit thus continue to be a factor supporting growth in the US rather than restraining it – a key difference to the euro area.


Bank credit standards supportive for US growth

The Federal Reserve’s July Senior loan officer survey covering the three months up to mid July showed that a moderately positive net percentage of domestic banks eased lending standards further and demand for loans continued to strengthen. Contrary to Europe, developments in bank lending standards and credit thus continue to be a factor supporting growth in the US rather than restraining it (for more on the recent euro area bank lending survey see Flash Comment: Euro area - Banks continue to tighten credit standards, 26 July).

This difference is also evident in Fed’s July Senior Loan officer survey as the Fed reported that foreign banks operating in the US did generally tighten lending standards for their customers. Further, a separate questionnaire revealed that domestic banks face less competition from European banks.

Turning to the details, lending standards for businesses were on average eased further and demand for business loans increased although only very modest for smaller firms.

For households, lending standards for prime mortgages were on average unchanged, while standards for non-traditional mortgages were tightened further. Demand for both types of loans increased significantly over the three months in line with the reported pickup in home sales activity and refinancing.

For consumer loans, standards were eased as well. Standards for auto loans were eased the most and also saw the greatest increase in demand. Another positive indicator for private consumption growth is that the net fraction of banks reporting increased willingness to make consumer instalment loans has held up.

Finally, banks reported a net easing in credit standards on commercial real estate loans and a continued increase in demand.

For more charts see Federal Reserve SLO July.