United States: Strict bank loan standards and weak loan demand remain unchanged
2023-11-09
■ The tone of reduced loan demand and strict loan standards still exists, although the pace has slowed down
■ The vigilance against the deterioration of credit risk in US financial institutions remains strong
The Federal Reserve Board (FRB) released its latest Senior Loan Officer Opinion Survey (SLOOS) on November 6th. This is a quarterly survey conducted by FRB on US financial institutions to understand their changes in loan standards, funding requirements, and other aspects three months ago and now. The financial institutions under investigation received the survey form on September 25th and answered the questions before October 5th.
The demand for commercial loans for large and medium-sized enterprises (with annual sales exceeding $50 million), DI (the proportion of demand increase minus the proportion of demand decrease), has increased from a survey in July (-51.6) to -30.5. The loan standard DI (strict ratio minus lose ratio) has decreased from the previous survey (50.8) to 33.9. The changes in the two DIs are mainly due to a significant increase in response to no changes in loan demand or loan standards over the past three months. Therefore, this SLOOS does not imply an increase in loan demand or a relaxation of loan standards but should be interpreted as, despite the slowdown in loan demand and the pace of tightening loan standards in the context of uncertain economic prospects in the United States, the tone has not changed. High-interest rates have led to a decrease in household loan demand. In addition, in the field of commercial real estate loans, signs of stricter loan standards and a decrease in funding demand have reappeared.
In addition, two additional questions were raised in this SLOOS. Regarding the 'credit score of customers who can obtain loan approval', respondents stated that the credit score of customers who can obtain car loans or credit card approval has increased since the beginning of the year. This indicates that financial institutions have become more stringent in their selection criteria for customers. In addition, in terms of the reasons for tightening loan standards between July and September, respondents mentioned deteriorating economic prospects, declining credit and collateral values of loan recipients, and concerns about rising funding costs. There is still vigilance against the deterioration of the operating environment and credit risk of US financial institutions.
■ The vigilance against the deterioration of credit risk in US financial institutions remains strong
The Federal Reserve Board (FRB) released its latest Senior Loan Officer Opinion Survey (SLOOS) on November 6th. This is a quarterly survey conducted by FRB on US financial institutions to understand their changes in loan standards, funding requirements, and other aspects three months ago and now. The financial institutions under investigation received the survey form on September 25th and answered the questions before October 5th.
The demand for commercial loans for large and medium-sized enterprises (with annual sales exceeding $50 million), DI (the proportion of demand increase minus the proportion of demand decrease), has increased from a survey in July (-51.6) to -30.5. The loan standard DI (strict ratio minus lose ratio) has decreased from the previous survey (50.8) to 33.9. The changes in the two DIs are mainly due to a significant increase in response to no changes in loan demand or loan standards over the past three months. Therefore, this SLOOS does not imply an increase in loan demand or a relaxation of loan standards but should be interpreted as, despite the slowdown in loan demand and the pace of tightening loan standards in the context of uncertain economic prospects in the United States, the tone has not changed. High-interest rates have led to a decrease in household loan demand. In addition, in the field of commercial real estate loans, signs of stricter loan standards and a decrease in funding demand have reappeared.
In addition, two additional questions were raised in this SLOOS. Regarding the 'credit score of customers who can obtain loan approval', respondents stated that the credit score of customers who can obtain car loans or credit card approval has increased since the beginning of the year. This indicates that financial institutions have become more stringent in their selection criteria for customers. In addition, in terms of the reasons for tightening loan standards between July and September, respondents mentioned deteriorating economic prospects, declining credit and collateral values of loan recipients, and concerns about rising funding costs. There is still vigilance against the deterioration of the operating environment and credit risk of US financial institutions.