WASHINGTON — Lending remained depressed throughout the country as banks tightened credit standards and economic uncertainty persisted, according to the Federal Reserve Board's latest economic survey.
The Fed's Beige Book, released Wednesday, noted a rise in the number of loan inquiries by consumers and businesses in a few Fed districts, such as Philadelphia and Richmond, but said the majority of banks remained cautious about lending. Districts led by New York, Cleveland and Kansas City reported the weakest demand in lending. The other nine districts said demand had remained "unchanged, but soft."
One concern for bankers is credit quality, according to Philadelphia bankers. Some noted initial signs of future loan growth, such as a rise in inquiries, but most said they expect consumer loan demand to remain poor.
"Credit quality is holding its own, but we are concerned that some borrowers will not be able to stay current beyond the first quarter," a banker from the Philadelphia district said.
In New York, bankers reported lower demand for all loans, particularly with residential mortgages, as well as lower demand for refinancings. They also reported rising delinquency rates in all areas, except commercial and industrial loans. Richmond bankers called loan demand "tepid."
They said a modest tightening of credit standards was making it harder for customers and businesses to get loan approval. Though there has been increased interest in loans, bankers said, many clients have been forgoing filling out lending applications because of the sluggish economy.
Chicago bankers had a similar assessment. One remarked, "Clients were still waiting for the uncertainty surrounding the economic outlook to pass before taking on new debt."
The beige book, a summary of regional conditions across 12 of the Fed's districts, is typically released in advance of the central bank's policy-setting meetings.
