WASHINGTON (AP) — A Federal Reserve report Monday showed that banks raised their lending standards for business and consumer loans in the aftermath of three large bank failures and expect to lift them more this year, a trend that could slow the economy in coming months and increases the risk of a recession.
The report, known as the senior loan officers survey, asked banks if they have tightened their lending standards by taking steps such as demanding higher credit scores, charging higher interest rates, or requiring more collateral, among other steps, that altogether would make it harder for businesses and consumers to obtain loans.
About 46% of all banks said they had raised standards for business loans known as commercial and industrial loans, up from just under 45% in the previous quarter. That increase was not as dramatic as in previous quarters, but banks were tightening credit before the bank failures. A year ago, slightly more banks were easing credit standards than raising them. Now nearly half are tightening.
At the depths of the 2008 financial crisis, that figure topped 80%.
The Fed’s survey also found that a majority of banks plan to tighten their credit further this year.