Academic journal article ABA Banking Journal

Credit Quality Steady, but Banks Believe Caution Is Justified

Academic journal article ABA Banking Journal

Credit Quality Steady, but Banks Believe Caution Is Justified

Article excerpt

Nearly 80% of the community bankers responding to an ABA Banking Journal yearend credit poll believe bank regulators' renewed warnings regarding credit quality are on target. Another 5.5% believe the regulators aren't making their warnings strong enough, while 13.7% think the concerns are overstated.

Among the members of ABA's Community Bankers Council who responded to a written survey in midNovember, 60% said they have taken steps to prepare for an increase in problem loans due to a possible downturn.

"We are watching credit quality closely, not procrastinating on past dues, and trying to move problem credits," said a Southeastern banker. "I do not believe the economic downturn will be too serious, but real estate is slowing."

Bankers typically reported no significant change in delinquencies, overall, in five common credit categories over the previous six months. They projected mostly steady performance looking ahead, with the exception of farm loans.

Only four out of ten bankers responding had taken steps to tighten credit standards in any particular areas over the previous three months and only one in ten reported that competitors are tightening standards.

"We never lowered our credit standards, so we have not had to tighten them," observed one Western banker. "Among our competitors, I do not see any slowing in the drive to catch virtually any loan at sometimes any rate," said a Southwestern banker. …

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