US banks tightened their lending standards in the early months of this year, and the trend is expected to continue throughout 2023, according to a survey released by the Federal Reserve.
The report, closely watched on Wall Street, comes amid financial sector fears of a deposit run-off amid the turmoil caused by the collapse of Silicon Valley Bank and Signature Bank in March.
Mid-sized bank stocks have posted significant losses in recent weeks amid investor fears of a repeat of previous scenarios in which a run on deposits hastened or played a large role in the collapse of banks.
And the Fed said that when asked about expectations for lending standards for the rest of 2023, “banks have said they expect standards to be tightened across all categories of loans.”
According to a survey of bank lending practices, the most commonly cited excuses include expected deterioration in the credit quality of loan portfolios and collateral values, as well as reduced risk tolerance.
The survey added that, among other reasons, “concerns about the cost of bank financing, the situation with liquidity in banks and the outflow of deposits abroad.”
He added that respondents noted a tightening of regulations and a decrease in demand in the first quarter of the year for various types of loans issued to businesses and families, noting that “generally, the tightening of standards for business loans was mentioned more often. in medium banks.
In terms of commercial and industrial lending, midsize banks and other banks were more cited for their liquidity and concerns, including growing concerns about the implications of legislative changes.
Banks’ concerns also included uncertainty about the economic outlook.