Some large banks, defined as those with assets greater than $20 billion, have reported easing their commercial loan terms to businesses, the latest Federal Reserve Board senior bank officer survey revealed.
Overall, banks reported little net change in their standards for commercial and industrial loans in the fourth quarter of 2009, according to the survey released Jan. 29. However, the net fraction of banks that reported further tightening of loan terms over the past three months was considerably lower than responses from the most recent Fed surveys.
Most of the handful of banks that experienced an increase in loan demand cited a shift in customer borrowing to their banks from other credit sources, as well as customers' increased need to finance mergers or acquisitions and accounts receivable, according to the survey.
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At the end of the fourth quarter of 2009, respondents said delinquency rates on C&I loans was higher at small businesses than large and mid-size firms and they expect that trend to continue this year. The majority of banks indicated that their outlook for the change in credit quality in 2010 was more balanced relative to their pessimistic outlook, when asked one year ago about the outlook for the change in credit quality in 2009.
The Fed survey is based on responses from 55 domestic banks and 23 U.S. branches and agencies of foreign banks.
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