The Office of the Comptroller of the Currency (OCC), an agency of the U.S. Department of the Treasury, reports today that its annual survey of banks’ credit underwriting standards — guidelines for issuing loans — found that commercial credit standards remained tight for the 12-month period ending on 31 March 2010. Credit standards for small business loans likewise remained tight into 2010, with most banks believing that small business loans became riskier.
The 2010 survey covered 51 of the largest national banks with assets of $3 billion or more, holding a total of $4 trillion in loans, which represents more than 93 percent of all outstanding loans in the national banking system.
For the third consecutive year, the OCC survey found a majority of banks tightening their underwriting standards for commercial loans overall. However, the percentage of banks tightening their credit standards dropped to 65 percent in 2010 from 86 percent in 2009. For small business loans, a comparable percentage of banks in 2010 (66%) tightened their credit standards, about the same as in 2009. One-third (34%) of respondents said they kept credit standards unchanged, while none reported easing their standards for small business loans.
The vast majority of responding bankers (85%) believed the credit risk of their small business loan portfolios increased either somewhat (66%) or significantly (19%) this year. Looking ahead to the next 12 months, however, some 22 percent expect their small business risk levels to stay the same, and a few (3%) expect that credit risk to decline somewhat.
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