Banks Tightening Lending
Feb 2nd, 2009 | By Rob | Category: Credit Cards
The Federal Reserve Board released the January 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices. The survey was distributed at the end of December 2008 and covers the period between October and December 2008. For those interested in the full report, you can find it here. The prior report was distributed to survey takers at the end of September 2008 and completed in October.
For those that are only interested in it as it pertains to the tightening of credit standards on households, the survey confirms what many already know: some banks are cutting account limits on existing credit cards and home equity lines of credit. The report says:
Regarding accounts for households, about 40 percent of domestic banks reported having reduced the sizes of existing home equity lines of credit, on net, and approximately 35 percent reported having trimmed existing consumer credit card account limits.
It is also interesting, and a bit frightening, to see the information displayed on a graph. For example, the graph of the percentage of domestic banks tightening lending standards on consumer loans is especially frightening:
After checking out the data, I am left wondering how much banks and credit card companies are tightening their standards. I don’t think that anyone would be surprised to learn that banks are re-examinging their lending practices in light of what has happened - in fact, I think I would be concerned about any financial institution that not to look into them, given how completely offguard some institutions such as Fannie Mae were caught this fall.
The question that I am left with is how much banks are tightening standards on loans. What percentage of the population that would have been able to get a loan in 2007 will not be able to get a loan in 2009?
