The numbers: Banks continued to tighten standards for business loans in the third quarter, according to a survey of loan officers conducted by the Federal Reserve.
There was weaker demand for loans from firms of all sizes. Many banks reported that the number of inquiries from potential borrowers dropped sharply.Asked why they had tightened standards for all loan categories, banks most frequently cited a less favorable economic outlook, reduced tolerance for risk, deterioration in credit quality of loans and concerns about funding costs.
Big picture: The tightening of bank standards has been going on since mid-2022 but only received widespread attention with the collapse in spring 2023 of Silicon Valley Bank, Signature Bank and First Republic Bank, according to Richard Moody, chief economist at Regions Financial Corp.Moody said that bank lending, on a year-over-year basis, had already fallen below 4% in October, a very weak number historically.