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Big US Banks Ease Lending Conditions

By    |   Friday, 31 January 2014 01:10 PM

Large U.S. banks are loosening their loan requirements, which could boost economic growth, The Wall Street Journal reports.

The U.S. Office of the Comptroller of the Currency reported Thursday that banks relaxed lending conditions for businesses and consumers during the 18 months through June 30, 2013.

The trend stems from rising U.S. economic growth, competition among banks for a constrained amount of loans and the low interest rates that are pushing banks to find higher returns, The Journal reports. The economy expanded 3.2 percent in the fourth quarter.

There is concern that banks may go out too far on the risk curve as they did prior to the 2008-09 financial crisis. The OCC report deemed banks' loan standards as "good or satisfactory" now.

But, "the more [banks] loan, just naturally there is going to be more risk," Bob Piepergerdes, the OCC's director for retail credit risk, told The Journal. "It's a matter of how well they can control that risk."

The heads of some major U.S. banks have indicated they expect to make more loans in 2014, based on anecdotal evidence, The Journal reports.

A Fitch Ratings report says small banks may be the ones at risk from loosening their loan standards.

"Smaller U.S. banks appear to have been more aggressive lenders over the last 12 months and may be more vulnerable to asset quality deterioration in a rising rate environment," the report says.

"Loan growth trends among larger and smaller U.S. banks noticeably diverged in 2013. Loan books were broadly stable at the 25 largest institutions in 2013, while the small banks group grew loans by 4.8 percent, according to recently released Fed data."

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Large U.S. banks are loosening their loan requirements, which could boost economic growth, The Wall Street Journal reports.
banks,loans,financial,crisis
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2014-10-31
Friday, 31 January 2014 01:10 PM
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