November 14, 2024 - This week, the Federal Reserve published its October 2024 Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS). Responses were received from 66 domestic banks and 20 U.S. branches and agencies of foreign banks.
Generally, banks reported weaker demand in 3Q24 for commercial and industrial (C&I) loans to businesses of all sizes. However, a small share of foreign banks reported stronger demand for C&I loans. The lighter demand was attributed to a drop in plant and equipment investment and decreasing inventory, accounts receivable and M&A financing needs.
For the C&I lending activity that was generated, standards for loans to large and middle-market borrowers were largely unchanged but tighter for loans to small borrowers. A small share of banks increased premiums on riskier loans and the use of interest rate floors in loans to large and middle-market businesses. For loans to small businesses, tightening was evidenced most in higher premiums on riskier loans although a small share of banks reported tightening collateral and covenant terms.
Banks that reported tightening cited economic uncertainty, industry-specific issues, lower risk tolerance, the effects of legislative changes and supervisory actions, deteriorating capital positions and less competition. Foreign banks did not change C&I lending standards or terms.
Similarly, banks reported weaker demand across all commercial real estate (CRE) loan categories. While large banks reported standards were unchanged (or looser) for some CRE categories, most other banks experienced tightening across all categories. Foreign banks reported 3Q24 standards for CRE loans were basically unchanged.
