The July 2014 Senior Loan Officer Opinion Survey on Bank Lending Practices addressed changes in the standards and terms on, and demand for, bank loans to businesses and households over the past three months. This summary is based on the responses from 75 domestic banks and 23 U.S. branches and agencies of foreign banks.

The July survey results showed a continued easing of lending standards and terms for many types of loan categories amid a broad-based pickup in loan demand. Domestic banks generally continued to ease their lending standards and various terms for commercial and industrial (C&I) loans. In contrast, foreign banks reported little change in standards and in most of the surveyed terms for C&I loans on net.

Domestic respondents, meanwhile, also reported having eased standards on most types of commercial real estate (CRE) loans on balance. Although many banks reported having eased standards for prime residential real estate (RRE) loans, respondents generally indicated little change in standards and terms for other types of loans to households. However, a few large banks had eased standards, increased credit limits, and reduced the minimum required credit score for credit card loans. Banks also reported having experienced stronger demand over the past three months, on net, for many more loan categories than on the April survey.

Business Lending

As has been the case in each of the past three surveys, a small percentage of domestic respondents reported having eased standards on C&I loans, both to large and middle-market firms and to small firms, over the past three months. In contrast, moderate to large fractions of banks reported having eased various price and nonprice terms on C&I loans on net.

Of the terms included in the survey, banks continued to report the most widespread easing on spreads of C&I loan rates over banks' costs of funds. In addition, for all firm sizes, a significant fraction of banks reported having reduced the cost of credit lines and decreased the use of interest rate floors on balance. Although a more moderate fraction indicated having eased loan covenants, close to one-third of the large banks in the sample reported having done so for loans extended to large and middle-market firms over the past three months. Most domestic respondents that reported having eased either standards or terms on C&I loans over the past three months continued to cite more-aggressive competition from other banks or nonbank lenders as an important reason for having done so. Smaller numbers of banks also attributed their easing to a more favorable or less uncertain economic outlook or to an increased tolerance for risk.

On the demand side, a significant fraction of banks reported having experienced stronger demand for C&I loans from firms of all sizes on balance. To explain the reported increase in loan demand, banks cited a wide range of customers' financing needs, particularly those related to investment in plant or equipment, accounts receivable, inventories, or mergers or acquisitions.

Most foreign survey respondents reported that C&I lending standards had remained basically unchanged, though several indicated having eased some terms. Only a few foreign banks reported stronger demand, while none reported weaker demand.

To read the full July 2014 Senior Loan Officer Opinion Survey, click here.