US banks tightened lending conditions

US, WASHINGTON (ORDO NEWS) — Amid the coronavirus pandemic, US banks have tightened credit conditions. In the first three months of this year, both the requirements and the timing of loans have changed Reuters, citing a Fed review.

In addition, officials in charge of the industry reported an increase in demand for commercial loans and financing from medium and large companies. One of the possible reasons behind this could be the availability of alternative financing resources like mezzanine equity to fund growth projects and acquisitions. However, the demand for business loans from small enterprises in the first quarter practically did not change.

Banks reported tightening standards in all three categories of consumer loans: credit cards, car loans, and other consumer loans. At the same time, demand for them decreased over the indicated period.

“Banks reported that changes in standards and demand for loan categories reported in the first quarter occurred at the end of March. At the same time, economic outlook changed amid news of the rapid global spread of COVID-19,” the quarterly US central bank survey.

In compiling the survey, the Fed interviewed loan officers at 67 local banks and 22 US branches and agencies of foreign banks. Basically, credit institutions, explaining the tightening of conditions, referred to more uncertain economic prospects, aggravation of problems specific to the industry, and the reluctance of banks to take risks.

According to bank representatives, because of the consequences of the outbreak of coronavirus, they “were focused on existing customers, rather than providing loans to new customers.”

Since the beginning of March, the Fed has pumped trillions of dollars into the US financial markets, including in order to provide loans to businesses and households. The regulator launched numerous anti-crisis programs, lowered interest rates to almost zero, and resumed large-scale asset purchases.


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