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Banks still stingy on lending

Most institutions made it harder for businesses and consumers to get loans in the last three months despite capital infusions from the government, a Federal Reserve survey shows.

February 03, 2009|Tom Petruno

Most banks still are tightening the screws on borrowers, despite the government's efforts to ease credit conditions by injecting lenders with capital.

The Federal Reserve's latest survey of bank lending, reported Monday, showed that a majority of banks made it harder to get loans in the last three months -- although in some loan categories the percentage tightening credit was down from the Fed's October survey.

A net 64% of domestic banks said they tightened lending standards on commercial and industrial loans to large and mid-size companies in the last three months, down from the 84% that said they had tightened in the October survey. A year earlier, just 32% of banks said they had made loans harder to get.

Smaller companies found it tougher to get loans at a net 69% of banks in the last three months, compared with 75% in the October survey.

Even if they weren't otherwise tightening loan standards, most banks were raising the rates they charge for credit, the Fed said.

"Around 90% of domestic banks indicated that they had increased spreads of loan rates over their cost of funds" for commercial and industrial loans, the survey found. "Likewise, very large fractions of banks reported having charged higher premiums on riskier loans and having increased the costs of credit lines to firms of all sizes over the survey period."

Commercial real estate lending standards were tightened by 79% of domestic banks, compared with the 87% that reported making loans harder to get in the October survey.

Consumers with good credit may have found it somewhat easier to get a mortgage: The percentage of lenders tightening standards on prime home loans fell to 47% in the latest survey from 69% in the previous survey.


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