WASHINGTON — Credit standards for commercial loans to medium and large firms showed some signs of easing over the last three months of 2017, even though demand stayed relatively unchanged, the Federal Reserve Board’s senior loan officer survey found.

According to 11 of the 70 bank loan officers who responded to the survey, lending standards to firms with more than $50 million in annual sales “eased somewhat” while three indicated that that standards tightened “somewhat.” One of the loan officers said standards tightened “considerably.”

At smaller firms, with less than $50 million in sales, 61 of the 67 of the respondents said lending standards were unchanged.

"Regarding loans to businesses, respondents to the January survey indicated that, on balance, banks eased their standards and terms on commercial and industrial loans to large and middle-market firms while demand for such loans was basically unchanged," the Fed said in the report, which was released Monday.

Bankers reported increasing competition as the biggest factor in the decision to ease lending standards.

"Among the domestic respondents that reportedly eased their credit policies on [commercial and industrial] loans over the past three months, more aggressive competition from other banks or nonbank lenders was by far the most emphasized reason for easing," the report said. "Nearly every bank that reported having eased standards attributed this change, in part, to more aggressive competition, with a majority of respondents indicating that the reason was 'very important.' "

Other factors were cited, such as an improving economic outlook, but none as pronounced as the increasing competition.

"No other reason queried was cited as important by a majority of banks, nor was any other reason cited as 'very important' by more than a couple of banks," the report said. "However, significant shares of banks additionally reported that improvements in the favorability or certainty of the economic outlook, improvement in industry-specific problems, increased risk tolerance, and increased secondary market liquidity also contributed to their having eased standards on C&I loans."

The loan officers did acknowledge that the spread between the loan rates to businesses with $50 million or more in sales compared to the banks' cost of funding was narrower, with 18 of 69 loan officers saying those spreads were “somewhat” narrower. Seven of the survey's respondents said the spread had widened and 44 said it was unchanged.

According to the survey, bank loan officers also said lending standards for loans eligible to be sold to the government-sponsored enterprises Fannie Mae and Freddie Mac had loosened.

Twelve of the 58 loan officers who responded to a question about demand for GSE-eligible residential mortgages said that demand was “moderately weaker” while only three said demand was slightly stronger. Forty-one of the loan officers said demand was about the same.

“On balance, banks reported that standards for residential home purchase mortgage lending remained basically unchanged over the past three months, with the exception of mortgages eligible to be securitized by government sponsored enterprises, for which a moderate net share of banks reported easing their underwriting standards,” the report said.

The survey also said that banks were tightening standards for commercial real estate loans while demand slowed.

Roughly 15% of the 68 respondents to a question about construction and land development loans said standards tightened somewhat over the last three months of 2017. Thirteen respondents said demand was weaker.

Seventeen percent of 69 respondents to a question about loans secured by multifamily real estate said lending standards toughened, while 20% said demand for multifamily loans was weaker.

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