U.S. banks further eased business loan standards in Q2 2018

FILE PHOTO: A security guard patrols the Federal Reserve building in Washington, DC, U.S., July 16, 2018. REUTERS/Leah Millis/File Photo

WASHINGTON (Reuters) - Loan officers at U.S. banks reported easing lending standards for business loans for firms of all sizes while keeping terms for commercial real estate loans almost unchanged in the second quarter, a Federal Reserve survey showed on Monday.

The officers also said they were seeing stronger demand for business loans from small firms and weaker interest in commercial real estate loans.

“Notably, almost all domestic banks that reportedly eased standards or terms on [business] loans over the past three months cited increased competition from other lenders as a reason for easing, ” the U.S. central bank said in its quarterly survey.

Other factors included increased tolerance for risk and increased liquidity in the secondary market, loan officers said.

U.S. banks previously reported easing standards for many business loans and some commercial real estate loans in the first quarter.

The Fed has raised interest rates seven times since it began a tightening cycle in December 2015, including twice so far this year. The Fed is forecasting another two rate rises in 2018, with investors seeing further hikes in September and December.

Financial conditions have remained relatively loose even as policymakers continue to gradually raise rates amid a strong economy.

Banks also reported lending standards for residential real estate loans and auto loans were little changed, according to the survey. A moderate share of banks said they had tightened standards on credit card loans.

The Fed surveyed loan officers at 72 domestic banks and 22 U.S. branches and agencies of foreign banks.

Reporting by Lindsay Dunsmuir; Editing by Andrea Ricci