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Wednesday, May 4, 2016

Survey Shows Banks Concerned Over "Big Money" Lending

The Federal Reserve announced that big corporate loans are constricting. The Senior Loan Officer Opinion Survey (SLOOS) showed that Commercial & Industrial Loans as well as Commercial Real Estate Loans are becoming more difficult to obtain. The news indicates that big lenders might be expecting a slowdown soon and this could have an impact on the economy. 

The economy is doing well and has been expanding so money flowed freely as banks felt they could maximize their opportunities. As they become more concerned about the economy they raise the standards for loan approval and the cost of lending to compensate for increased risk. It is a direct risk and reward decision.

When medium and big business have a harder time obtaining credit they expand slower and have to use more of their own financial resources to complete projects and maintain operating expenses. The pace of investment and expansion that creates jobs also slows down as a result of less money being available. 

Thus far the survey indicates that large companies and large real estate projects will be slowing as well. It doesn't mean that it is a true indication of what is going to happen in the economy but it does highlight a growing concern that large banks are having. Banks have extensive knowledge in market projections and seem to feel that a slow down is on the horizon. 

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