Magazine article American Banker

43% of Smaller Banks in West Say Exams Keep Credit Tight

Magazine article American Banker

43% of Smaller Banks in West Say Exams Keep Credit Tight

Article excerpt

43% of Smaller Banks in West Say Exams Keep Credit Tight

LOS ANGELES - In a survey indicating the lingering effects of tough regulatory examinations, 43% of independent bank chief executives in the West said they were rejecting loan applications even from creditworthy borrowers.

The bankers in nine western states said the tight credit policies were a response to their examinations, according to the survey by the Western Independent Bankers Association and the Secura Group, a Washington-based consulting firm.

The percentage reporting such rejections is up from 29% a year ago.

Nine of 10 respondents represented banks with less than $500 million. The regulatory question was answered only by those that had been visited by examiners in the past year.

The survey was taken in October at about the same time the Federal Reserve Board was coming up with a contrasting conclusion in its most recent survey of bank lending officers.

Released Nov. 13, the Fed data showed most banks were no longer tightening credit standards. But borrowing costs were continuing to rise, which could have the effect of keeping credit tight.

Economists and consultants said the recession has more recently hit the West. Therefore, western bankers are still tightening standards while those in other parts of the country are beginning to ease.

The Western Independent Bankers survey "reflects the magnitude of what is going on in California," said Jack Kyser, an economist with the Los Angeles Economic Development Council.

Cultural Difference?

Others suggested that the relatively small banks surveyed by the group may not have been in close touch with political and jawboning efforts to relax examination standards and stimulate the economy.

"It is really easy for a big bank to get the word from the Fed," said Scott Burford, president of Burford Capital, a Los Angeles investment banking firm that caters to smaller banks. …

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