Lenders Ease Their Standards (a Bit) in 2Q

According to the Federal Reserve, reporting in its July 2013 Senior Loan Officer Opinion Survey on Bank Lending Practices, domestic banks claim (on balance) to have eased their lending standards, and have experienced stronger demand for loans over the past three months.

According to the Federal Reserve on Monday, reporting in its July 2013 Senior Loan Officer Opinion Survey on Bank Lending Practices, domestic banks claim (on balance) to have eased their lending standards, and have experienced stronger demand for loans over the past three months. The report was based on the responses from 73 domestic banks and 22 U.S. branches and agencies of foreign banks.

That’s a shift in lending practices compared with the years following 2008, when banks tightened their lending standards quickly and sternly, in reaction to the sour economy and (as bankers were always fond of asserting) because regulators told them to. For a while afterward, lending to businesses in the post-recessionary period loosened a little more than lending to households, but now both categories seem to be benefiting from looser standards.

The July survey indicated that banks eased their lending policies for commercial and industrial (C&I) and CRE loans, and experienced stronger demand for such loans over the past three months. The survey results also found that banks eased standards and terms on, and saw increases in demand for, some categories of lending to households.

Some respondents reported having eased standards on prime residential or nontraditional mortgage loans, while a larger number said that they’d seen increased demand for prime mortgage loans. Some respondents also reported that they’d eased standards on auto loans over the past three months, while a smaller number said they’d eased standards on credit card loans and other consumer loans.

Non-manufacturing activity up in June

The Institute for Supply Management reported on Monday that economic activity in the U.S. non-manufacturing sector—in which most people work—grew for the 43rd consecutive month in July. The Non-Manufacturing ISM Report On Business said that the organization’s non-manufacturing index came in at 56 percent in July, up 3.8 percentage points from June. Any reading over 50 means expansion, and the higher the reading, the stronger the expansion.

Most of the index’s components were also up. The Non-Manufacturing Business Activity Index increased substantially to 60.4 percent, which is 8.7 percentage points higher than in June, reflecting growth for the 48th consecutive month. The New Orders Index spiked by 6.9 percentage points to 57.7 percent, but the Employment Index dropped 1.5 percentage points to 53.2 percent. The Prices Index increased 7.6 percentage points to 60.1 percent, indicating price increases for the sector at a significantly faster rate in July than June.

Wall Street ended Monday mixed, but mostly down, with the Dow Jones Industrial Average off 46.23 points, or 0.3 percent, and the S&P 500 down 0.15 percent. But the Nasdaq eked out a gain of 0.09 percent.