Number of Banks Tightening Lending Standards Rises

Article excerpt

WASHINGTON (Bloomberg) -- One-third of U.S. banks tightened their lending standards over the past three months, the largest number since the last credit crunch in 1990, the Federal Reserve reported Friday.

The Fed's November survey of senior loan officers found "a broad tightening of business lending practices."

The survey also showed that unlike recent surveys, U.S. banks reported tighter standards for loans to small businesses. Past surveys showed that tightening standards were confined to larger business borrowers. The increasing stinginess isn't reflected in the household sector, where the Fed found "little evidence of any changes in lending practices." A few banks were more willing to make consumer installment loans. That finding is consistent with a recent Fed consumer credit survey. In September, consumer borrowing rose $8.4 billion to $1.282 trillion after rising $4.4 billion in August, according to a Federal Reserve survey. The gain caught analysts by surprise, who had forecast an increase of $4.7 billion for September. The loan officers cited "good headway" in assessing risks from the Year 2000 computer problems and said "a majority of their important business customers were satisfactorily approaching Year 2000 preparedness. …