Daily Management Review

US banks tighten lending requirements for households and businesses


US banks have tightened lending requirements for all types of consumer loans as well as commercial loans due to a decline in account deposits and poor loan portfolio quality, according to the US Federal Reserve (Fed) survey.

In an April analysis of the US banking industry, the regulator stated that "standards have tightened for all categories of consumer credit, with demand weakening for car and other consumer loans."

Banks have tightened their lending criteria for commercial loans as well as consumer loans. "Regarding loans to companies, survey respondents reported a general tightening of requirements and weakening of demand for commercial and industrial loans for large and medium-sized firms as well as small businesses during the first quarter," the study shows.

The main factors for tightening lending standards include deposit outflows, decreased risk tolerance, declining loan portfolio quality, and the amount of available liquidity.

source: cnbc.com