the Federal Reserve said Tuesday. In the past three months, banks have tightened guidelines for commercial real estate and residential mortgage lending, the central bank said. In addition, banks are also less willing to make new consumer loans. "Taken together, these results suggest that the easing of lending standards over the past few years has virtually ceased," the Fed concluded from its quarterly survey of senior loan officers. The central bank's study, which relies on a survey of lenders at 59 domestic banks and 24 foreign-bank branches, found that 96% of banks had either tightened or left unchanged their standards for approving commercial and industrial loans to large firms. Also, all of the banks either tightened or left unchanged credit standards for construction and land development loans, and for commercial real estate loans. The survey comes after more than a year of criticisms by regulators of bank lending practices. However, bank economists said the firming up in credit standards probably has more to do with changes in the economy. Jim Chessen, chief economist at the American Bankers Association, said bankers are reacting to higher loan delinquency and bankruptcy rates. "Those are all flashing yellow lights telling lenders to pause and think carefully about credit being given," he said. "It is not surprising," said Joseph Blalock, a senior financial economist at the trade group America's Community Bankers. "Banks eased standards mostly for commercial and industrial borrowers coming out of the recession in 1991 and 1992. They have just stopped doing that." Banks now have enough loans on their books that they don't have to lower standards any more to attract new customers, he said. Industry consultant Bert Ely said lending behavior was influenced both by the regulators' criticism and the recent rise in delinquency and bankruptcy rates. "You have a one-two punch that is causing people to tighten up," he said. However, other industry observers questioned the Fed's findings. "This result surprises me," said Susan Krause, the deputy comptroller for bank supervision. "I can't say I don't agree, because they have more data over the past few months. But it doesn't agree with what I have heard anecdotally." Dorothy M. Horvath, executive vice president and chief credit officer at National City Corp.'s Columbus subsidiary, said many of her fellow loan officers are still talking about easing credit quality standards. But she said the Fed report is good news. "We are very pleased to see this level off," she said. "If you continue to ease credit standards, then the banking industry will pay a significant penalty for that during the next downturn." Not all the news was good. The Fed found that 20% of the bankers said consumer loan delinquencies were higher than expected, while 10% said they were lower. Also, it said the spreads on loans had narrowed.

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