Senior Loan Officer Opinion Survey On Bank Lending Practices

The January 2022 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, which generally correspond to the fourth quarter of 2021.1

Regarding loans to businesses, respondents to the survey reported, on balance, easier standards and stronger demand for commercial and industrial (C&I) loans to firms of all sizes over the fourth quarter.2 Banks also reported easier standards and stronger demand for all commercial real estate (CRE) loan categories.

For loans to households, banks eased standards across most categories of residential real estate (RRE) loans and home equity lines of credit (HELOCs) over the fourth quarter while also reporting weaker demand for most types of RRE loans on net. In addition, banks eased standards for all consumer loan categories—that is, credit card loans, auto loans, and other consumer loans. Meanwhile, changes in demand were mixed across consumer loan types.

The survey also included a set of special questions inquiring about banks’ expectations for changes in lending standards, borrower demand, and loan performance over 2022. Banks, on balance, reported expecting lending standards to ease and demand to strengthen across most loan types. At the same time, banks reported mixed expectations about loan quality.

Lending to Businesses

(Table 1, questions 1–12; table 2, questions 1–8)

Questions on commercial and industrial lending. Over the fourth quarter, banks reported having eased standards and terms on C&I loans to firms of all sizes. Specifically, a moderate net share of banks reported having eased lending standards for approving C&I loans to large and middle-market firms. A moderate net share of small banks also reported having eased standards for loans to small firms, while those of large banks remained basically unchanged on net.3

Banks also reported having eased most queried terms on C&I loans to firms of all sizes over the fourth quarter.4 Easing was most widely reported for spreads of loan rates over the cost of funds, with a significant net share of banks reporting having eased this term for loans to firms of all sizes. Significant and moderate net shares of banks also reported having reduced the costs of credit lines and increased the maximum size of credit lines to large and middle-market firms and small firms, respectively. Moderate net shares of banks reduced the premiums charged on riskier loans and loan covenants for loans to large and middle-market firms as well as the use of interest rate floors for loans to firms of all sizes. Other queried C&I loan terms were either eased by a modest share of banks or remained basically unchanged on net. Meanwhile, foreign banks reported having left standards and most of their lending terms on C&I loans basically unchanged on net.

A major net share of banks that reported having eased standards or terms cited an improved economic outlook and more aggressive competition from other banks or nonbank lenders as important reasons for doing so. Significant net shares of banks also cited improvements in industry-specific problems, increased tolerance for risk, and improvements in their current or expected liquidity or capital positions as important reasons for easing lending standards and terms.

Regarding demand for C&I loans over the fourth quarter, a significant net share of banks reported stronger demand for loans from large and middle-market firms and a modest net share of banks reported stronger demand from small firms. Furthermore, a significant net share of banks reported a higher number of inquiries from potential borrowers regarding the availability and terms of new credit lines or increases in existing lines. Foreign banks reported that C&I loan demand remained basically unchanged on net.

Major net shares of banks cited higher customer investment in plant or equipment and increased mergers or acquisitions, inventory, and accounts receivable financing needs of customers as reasons for stronger demand over the fourth quarter.

Questions on commercial real estate lending. Over the fourth quarter, a significant net share of banks eased standards for multifamily loans secured by multifamily properties, while moderate net shares of banks eased standards for construction, land development, and nonfarm nonresidential loans. Meanwhile, a significant net share of banks reported stronger demand for loans secured by multifamily properties, and moderate net shares of banks reported stronger demand for construction, land development, and nonfarm nonresidential loans. Foreign banks reported that standards on CRE loans remained basically unchanged, on net, while a significant net share of foreign banks reported stronger demand for this type of loans.

Lending to Households

(Table 1, questions 13–26)

Questions on residential real estate lending. Over the fourth quarter, banks reported easier lending standards for most RRE loan types and HELOCs.5 Specifically, moderate net shares of banks eased standards for jumbo mortgages, non-qualified mortgage (QM) non-jumbo loans, and HELOCs, while a modest net share of banks eased standards for QM non-jumbo residential loans. The exceptions were government-sponsored enterprise (GSE)-eligible and government mortgages—for which standards were basically unchanged, on net—and subprime mortgages, which few banks reported as originating.

Meanwhile, banks generally reported weaker demand for RRE loans over the fourth quarter. Specifically, significant net shares of banks reported weaker demand for GSE-eligible and government mortgages; moderate net shares of banks reported weaker demand for QM non-jumbo, non-QM jumbo, and non-QM non-jumbo residential loans; and a modest net share of banks reported weaker demand for QM jumbo mortgages. Demand for HELOCs remained basically unchanged on net.

Questions on consumer lending. Over the fourth quarter, moderate net shares of banks eased standards for credit card, auto, and other consumer loans. Consistent with an easing of standards for credit card loans, a significant and moderate net share of banks also reported having eased minimum credit score requirements and credit limits for this type of loans, respectively. Meanwhile, a significant net share of banks reported having reduced spreads of interest rates charged for auto loans, and a moderate net share of banks pointed to a reduction in the minimum required credit score for both auto loans and other consumer loans. Other surveyed terms were either eased by a modest net share of banks or remained basically unchanged on net.6

Regarding demand for consumer loans, a moderate net share of banks reported stronger demand for credit card loans over the fourth quarter, while a modest net share of banks reported weaker demand for auto loans. Demand for consumer loans other than credit card and auto loans remained basically unchanged on net.

Special Questions on Banks’ Outlook for 2022

(Table 1, questions 27–40; table 2, questions 9–16)

The January survey also included a set of special questions inquiring about banks’ expectations for changes in lending standards, borrower demand, and asset quality over 2022, assuming that economic activity would evolve in line with consensus forecasts. On balance, banks reported expecting lending standards to ease further and loan demand to strengthen. Meanwhile, banks reported mixed expectations about loan quality.

Regarding lending standards, a modest net share of banks expected to ease standards for C&I loans to large and middle-market firms and CRE loans secured by multifamily properties over 2022, while standards for loans to small firms and nonfarm nonresidential, construction, and land development CRE loans are expected to remain basically unchanged on net.7 A moderate net share of banks also reported expecting to ease standards for all RRE and consumer loan categories.8 Widely cited reasons for expecting to ease standards over 2022 include an expected increase in risk tolerance and more aggressive competition expected from other bank or nonbank lenders.

Meanwhile, major or significant net shares of banks reported expecting loan demand to strengthen across C&I, CRE, and consumer loan categories over 2022. In contrast, a significant net share of banks expected demand for RRE loans—both GSE-eligible and nonconforming jumbo mortgages—to weaken. The most widely cited reason for stronger loan demand over 2022 was that the spending and investment needs of borrowers are expected to increase, in part because of more favorable income prospects. Among banks that reported expecting weaker demand, the most widely reported reason was an expected increase in interest rates.

Regarding expectations for loan quality—as measured by delinquencies and charge-offs—banks generally reported expecting an improvement in the quality of business loans in their portfolio over 2022, while expecting a deterioration in the quality of household loans. Specifically, moderate net shares of banks reported expecting the quality of non-syndicated C&I loans to large and middle-market firms and CRE loans secured by multifamily properties to improve, while modest net shares of banks reported expecting improvements in the quality of syndicated non-leveraged loans and construction, land development, and nonfarm nonresidential CRE loans.9 In contrast, significant net shares of banks expected a deterioration in the quality of credit card loans to prime and nonprime borrowers and of auto loans to nonprime borrowers; moderate net shares of banks expected the quality of auto loans to prime borrowers to worsen; and a modest net share of banks expected the quality of nonconforming jumbo mortgages to deteriorate.

This document was prepared by André F. Silva, with the assistance of Quinn Danielson, Division of Monetary Affairs, Board of Governors of the Federal Reserve System.


1. Responses were received from 73 domestic banks and 20 U.S. branches and agencies of foreign banks. Respondent banks received the survey on December 13, 2021, and responses were due by December 30, 2021. Unless otherwise indicated, this summary refers to the responses of domestic banks. 

2. Large and middle-market firms are defined as firms with annual sales of $50 million or more, and small firms are those with annual sales of less than $50 million. Large banks are defined as those with total domestic assets of $50 billion or more as of September 30, 2021. 

3. For questions that ask about lending standards or terms, “net fraction” (or “net percentage”) refers to the fraction of banks that reported having tightened (“tightened considerably” or “tightened somewhat”) minus the fraction of banks that reported having eased (“eased considerably” or “eased somewhat”). For questions that ask about loan demand, this term refers to the fraction of banks that reported stronger demand (“substantially stronger” or “moderately stronger”) minus the fraction of banks that reported weaker demand (“substantially weaker” or “moderately weaker”). For this summary, when standards, terms, or demand are said to have “remained basically unchanged,” the net percentage of respondent banks that reported either tightening or easing of standards or terms, or stronger or weaker demand, is greater than or equal to 0 and less than or equal to 5 percent; “modest” refers to net percentages greater than 5 and less than or equal to 10 percent; “moderate” refers to net percentages greater than 10 and less than or equal to 20 percent; “significant” refers to net percentages greater than 20 and less than 50 percent; and “major” refers to net percentages greater than or equal to 50 percent. 

4. Lending standards characterize banks’ policies for approving applications for a certain loan category. Conditional on approving loan applications, lending terms describe banks’ conditions included in loan contracts, such as those listed for C&I loans under question 2 to both domestic and foreign banks and those listed for credit card, auto, and other consumer loans under questions 21–23 to domestic banks. Thus, standards reflect the extensive margin of lending, while terms reflect the intensive margin of lending. The eight lending terms that banks are asked to consider with respect to C&I loans are the maximum size of credit lines, maximum maturity of loans or credit lines, costs of credit lines, spreads of loan rates over the bank’s cost of funds, premiums charged on riskier loans, loan covenants, collateralization requirements, and use of interest rate floors. 

5. The seven categories of residential home-purchase loans that banks are asked to consider are GSE-eligible, government, QM non-jumbo non-GSE-eligible, QM jumbo, non-QM jumbo, non-QM non-jumbo, and subprime. See the survey results tables that follow this summary for a description of each of these loan categories. The definition of a QM was introduced in the 2013 Mortgage Rules under the Truth in Lending Act (12 C.F.R. pt. 1026.32, Regulation Z). The standard for a QM excludes mortgages with loan characteristics such as negative amortization, balloon and interest-only payment schedules, terms exceeding 30 years, alt-A or no documentation, and total points and fees that exceed 3 percent of the loan amount. In addition, a QM requires that the monthly debt-to-income ratio of borrowers not exceed 43 percent. For more on the ability to repay and QM standards under Regulation Z, see Consumer Financial Protections Bureau (2019), “Ability to Repay and Qualified Mortgage Standards Under the Truth in Lending Act (Regulation Z),” webpage, https://www.consumerfinance.gov/regulations/ability-to-repay-and-qualified-mortgage-standards-under-the-truth-in-lending-act-regulation-z

6. Banks were asked about the minimum required credit score as well as changes in credit limits (credit card accounts and other consumer loans only), maximum maturity (auto loans only), loan rate spreads over costs of funds, the minimum percent of outstanding balances required to be repaid each month, and the extent to which loans are granted to borrowers not meeting credit score criteria. 

7. There are noticeable differences in responses between large and small banks. While large banks, on net, expected to ease standards for C&I loans to large and middle-market firms and multifamily CRE loans, smaller banks expected to keep them basically unchanged on net. 

8. Regarding the outlook for RRE loans, banks were asked about their expectations relative to lending standards, demand, and loan performance for GSE-eligible and nonconforming jumbo residential mortgage loans. For the outlook of consumer loans, banks were asked about their expectations relative to lending standards and demand for credit card loans and auto loans. Banks were also asked about their expectations relative to loan performance for consumer loans across prime and nonprime borrowers. 

9. Regarding the performance of business loans, banks were queried about expectations for the performance of four types of C&I loans (non-syndicated loans, syndicated non-leveraged loans, syndicated leveraged loans, and loans to small firms) and three types of CRE loans (multifamily loans, nonfarm nonresidential loans, and construction and land development loans). The quality of syndicated leveraged loans to large and middle-market firms and of loans to small firms was expected to remain basically unchanged, on net, over 2022. 

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