Bank / Credit Union

Banks tightening lending standards

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August 4, 2020

Despite the Federal Reserve's encouragement to lend to those hardest hit by the coronavirus pandemic, a Federal Reserve survey indicates banks are getting tougher and tightening lending standards by lowering credit limits and demanding higher minimum credit scores from consumers.

The survey also reveals foreign banks are reluctant to lend, according to a CNBC report.

"Major net shares of banks that reported reasons for tightening lending standards or terms cited a less favorable or more uncertain economic outlook, worsening of industry-specific problems, and reduced tolerance for risk as important reasons for doing so," stated the survey findings.

The banks also cited weaker capital positions, less competition and worries over increased regulatory burdens.

At the same time, demand for commercial and industrial loans decreased and except for residential real estate, the demand fell for all other forms of consumer debt.

The more stringent standards come four months after the Federal Reserve urged banks to do all they could to get money to those in need. The central bank even encouraged regulators to give some leeway to banks engaged in pushing funds to "customers and members."

The Federal Reserve is continuing to work with a number of lending facilities aimed at getting money to consumers and businesses both large and small.