U.S. Banks End Tightening on Business Loans
WASHINGTON -- U.S. banks aren't any longer tightening standards for lending to businesses, the Federal Reserve's latest survey of senior bank loan officers found.</br></br>Only 7% of domestic banks told the Fed in January that they were raising the bar to midsize and large business borrowers; in a survey conducted in November, 37% said they were. A mere 4% of the banks said they were tightening lending standards to small companies, compared with 15% in November.</br></br>When the Fed cut interest rates last fall, it cited, among other things, banks' reluctance to make loans and investors' reluctance to buy risky corporate bonds. The new Fed survey suggests that credit conditions have improved lately, though they still aren't as easy as they were in the first half of 1998.</br></br>Business demand for loans seems to have strengthened over the past three months, the new survey showed. The major factor, the bankers told the Fed, was that business customers have shifted borrowing from other sources that have become less attractive.</br></br>However, the Fed noted that U.S. branches of foreign banks continue to show a reluctance to make business loans. More than 60% of the foreign banks surveyed said they had tightened standards for approving commercial and industrial loans and lines of credit.