Big U.S. banks have tightened loan standards: survey

WASHINGTON (Reuters) - The biggest U.S. banks tightened underwriting practices for commercial and retail lending during the past year in response to the housing downturn and a weakening economy, according to a survey released by the U.S. Comptroller of the Currency on Thursday.

The survey, covering a 12-month period ended March 31, examined trends in lending standards and credit risk at the 62 biggest banks regulated by the comptroller's office.

"After four consecutive years of eased underwriting standards, the majority of the banks surveyed tightened underwriting standards for both commercial and retail loans," the survey said.

"Notwithstanding the recent overall tightening of standards, examiners anticipate that the relaxed underwriting standards of the past, coupled with current economic weaknesses, will result in increased credit risk and losses over the next 12 months," it said.

Banks are being forced to adopt more prudent underwriting standards for all types of lending also because of increased risk from rising energy costs and a decline in market liquidity.

In commercial residential construction lending, 62 percent of the banks surveyed said they had tightened underwriting standards during the past year. In retail, or consumer, lending, 68 percent of banks surveyed said they had tightened their practices.

Commercial real estate loans remain a "primary concern" for federal bank examiners because of the bank's significant concentrations in this area relative to their capital, the survey said.

The banks surveyed by the comptroller's office made 83 percent of total loans in the national banking system, worth some $3.7 trillion.

The survey results were posted on the Internet here .

(Reporting by Julie Vorman, Editing by Chizu Nomiyama)