August 1, 2016 / 6:10 PM / in 3 years

Banks tightened lending standards for businesses in second quarter: Fed survey

The skyline of lower Manhattan is seen as people lay on the grass in Brooklyn Bridge Park in the Brooklyn borough of New York City, U.S., May 27, 2016. REUTERS/Brendan McDermid

WASHINGTON (Reuters) - Banks tightened lending standards for commercial and industrial loans in the second quarter, according to a survey of loan officers released on Monday by the Federal Reserve.

At the same time, lending standards to households were little changed overall compared to the previous quarter.

Most banks said their reasons for more stringent standards in lending to businesses were “a less favorable or more uncertain economic outlook, worsening of industry-specific problems, and reduced tolerance for risk,” the survey said.

Most banks that did ease standards said they did so due to competition with other banks or nonbank lenders.

On residential real estate loans, the two sectors that saw some movement were loans eligible for purchase by government-sponsored enterprises and subprime mortgages.

A “moderate net fraction of banks reported having eased standards on GSE-eligible loans, while a moderate net fraction of banks reported having tightened standards on subprime residential mortgages,” according to the survey.

The Fed survey covered the second quarter of 2016, and included the responses of 71 domestic banks and 23 U.S. branches and agencies of foreign banks.

Reporting by Lindsay Dunsmuir; Editing by Andrea Ricci

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