WASHINGTON — Among the nation’s largest national banks, more than twice as many became tougher about lending to commercial borrowers during the 12 months ended March 31 than in the year-earlier period, according to the Office of the Comptroller of the Currency.

In the report on its seventh annual underwriting survey, issued Wednesday, the agency said 55% of the largest national banks tightened commercial loan standards, against 25% in the previous 12 months.

The OCC, which surveyed examiners at the 66 largest national banks, said bank loan portfolios grew riskier for the sixth consecutive year. Fifty-one percent of the examiners said that commercial credit risk had increased since the last survey, and 63% said they expected it to continue growing in the coming year.

In a letter to bank executives and directors, Comptroller John D. Hawke Jr. warned against letting “short-term earnings pressures … unduly influence their risk taking and risk management processes.”

Tighter underwriting was most prevalent in leveraged and syndicated lending, which continue to deteriorate, according to the agency. Almost all banks, 96%, got tougher with leveraged borrowers, and 66% scaled back syndicated lending.

Seventy-one percent of banks cited concern about the economy as the chief reason for tightening commercial underwriting standards.

“Reported tightening appears to be a rational response to prior practices and increasing problem-loan levels in a slowing economy,” Mr. Hawke said.

Tighter standards most often took the form of higher interest rates on commercial loans, but some banks began requiring more collateral, the survey found.

Retail lending also became stricter — for the fourth year in a row — but not as much as commercial lending did.

Roughly a third of banks tightened their retail loan underwriting, compared with 20% in 2000, while 20% eased their lending criteria, up 1% from last year.

Examiners reported tightening in all retail lending segments except affordable housing, where the degree of easing and tightening was equal.

For the third year, terms and conditions for consumer leasing and indirect consumer loans were tightened the most.

A plurality of loan officers, 46%, got tougher because their appetite for risk had been sated, while 32% got stingier because they saw a gloomy economy ahead, according to the OCC.

Lenders relied most heavily on pricing and loan fees in tightening their retail standards.

Mr. Hawke warned bankers that if they want more discretion in the future, they have to display more foresight now.

“The timeliness of risk recognition and the accuracy of credit risk ratings must improve before banks may safely set their own regulatory capital levels based on internal credit risk ratings, which is currently envisioned by the revised Basel Capital Accord,” Mr. Hawke stated.

While tighter underwriting standards can lead to a “credit crunch,” the agency noted that loans grew at national banks during the first quarter.

“Credit growth is quite reasonable compared to where we are in the economy,” said David D. Gibbons, deputy comptroller for credit risk. “There is positive growth in every category we track except one, installment loans.”



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