SUMMARY
- Long before the collapse of Silicon Valley Bank and Signature Bank, U.S. banks had started to report tightening lending standards for commercial and industrial loans for firms of all sizes. The chart below shows how, throughout the first two months of the year, at least 44% of domestic banks have reported tightened lending standards. With Q1 2023 data due in May, which will include the impact of the recent financial stability, expectations are for banks to accelerate loan tightening conditions.
- There is already evidence of this acceleration. The Federal Reserve releases an H.8 report every week, which estimates the average balance sheets of all U.S. commercial banks. From mid-March onwards, the H.8 report has shown a significant slowdown in loan growth. There has been a nearly $40 billion decline in commercial real estate loans over the last two weeks and record-level declines in loans and leases of more than $100 billion. Since the 1990s, the majority of these periods of rapid tightening have occurred during or prior to a recession.
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