WASHINGTON — Even as most institutions left their lending standards unchanged, several of the largest banks loosened underwriting criteria during the first quarter, according to a survey of senior loan officers released Monday by the Federal Reserve Board.
Overall, just six of the 56 institutions polled by the central bank said they loosened standards on commercial and industrial loans to large and midsize firms, but all of them were large institutions with more than $20 billion of assets.
Only two banks, one of which was large, said they tightened standards during that time, while 86% said they left underwriting criteria unchanged.
The survey may show that regulatory and lawmakers' criticism of the biggest banks could be getting through. President Obama and Federal Deposit Insurance Corp. Chairman Sheila Bair have both urged large banks in particular to boost lending to businesses, arguing they have spurred a credit crunch.
The survey marked the first time since 2006 that banks reported eased standards in two consecutive quarters.
Still, standards are likely to remain "quite stringent" after the "prolonged and widespread tightening that took place over the last few years," the Fed said.
The biggest factors influencing banks' lending policies during the first quarter were competitive pressures, the economic outlook and tolerance for risk in the C&I loan market, according to the survey.
The Fed's quarterly review, known as the Senior Loan Officer Opinion Survey on Bank Lending Practices, is based on responses from 56 domestic banks and 23 U.S. branches and agencies of foreign banks.
The survey offers a window into the banks' lending practices and insight into the country's economic recovery following the financial crisis.
On household lending, large banks eased standards for prime residential mortgages and home equity lines of credit, while smaller institutions tightened standards for both categories of lending.
Five of the 53 respondents said they had eased standards on prime residential mortgages, of which all but one were large institutions. An equal number of banks said they tightened standards somewhat, while 80% said standards remained unchanged.
Banks split on whether demand for prime mortgages was rising or falling. A little over 32% of respondents cited moderately weaker demand, while 2% said there was substantially weaker demand. Roughly 20%, however, said there was moderately stronger demand, and 45% said it was about the same.
Demand for nontraditional mortgages mostly trended downward. About 43% of the 21 banks that still offer such loans cited moderate or substantially weaker demand while only 10% cited stronger demand.
Two banks said they had eased the terms on such loans, while three said they tightened standards.
A significant number of domestic banks — about 14% — continued to report tightened standards on commercial real estate loans.
However, that was much less than in the previous survey released in January, which said 27% had tightened such standards.
Demand for such loans remained mostly unchanged, the survey said. Roughly 15% of banks reported moderately stronger demand, while 18% said there was moderately weaker demand and 3.6% cited substantially weaker demand. The balance said demand was mostly static.
The survey also found that nearly 47% of respondents increased their use of CRE loan extensions over the past six months.
Separately, the majority of banks also said they did not change their lending policies for businesses and households because of new accounting rules adopted in the first quarter.
Financial Accounting Standards 166 and 167 require financial institutions to bring securitized assets onto balance sheets.
In response to a special question, banks said they had continued to tighten standards and terms on credit card loans to small businesses. More than 30% of respondents said they tightened credit limits for small firms over the past six months, while most reported that conditions remained unchanged.