U.S. Banks Relax Loan Standards
By Alan Zibel and Ryan Tracy
A federal regulator said increased risk is creeping back into the financial system, warning in a report that U.S. banks are relaxing loan-underwriting standards in a manner similar to the years preceding the 2008 financial crisis. The largest U.S. lenders have loosened requirements for corporate loans and consumer borrowing such as credit cards and auto loans for three years in a row, the Office of the Comptroller of the Currency said in an annual report. The easing comes as banks search for higher-return investments amid low interest rates and competition from nonbank lenders. Officials at the OCC, which regulates national banks, warned a similar trend of gradual easing in lending standards took place in the early 2000s. The regulator noted similarities between the 2014 survey, which measured underwriting standards through June 30, and one issued in 2006. OCC officials said they didn’t believe current lending standards are too loose. Instead, they said they wanted to highlight specific areas of lending where they believe banks could be on a path toward taking too much risk, which they worried could lead to losses. Karen Shaw Petrou, managing partner of the policy-analysis firm Federal Financial Analytics Inc. in Washington, said regulators’ concerns may raise more hurdles for banks seeking profits in a relatively tough conditions. The report appears to be “designed to scare the devil out of anyone who reads it,” Ms. Petrou said. “I am really not sure what else the banks could be doing right now…to make money.”
http://www.wsj.com/articles/u-s-banks-relax-loan-standards-1418760626?KEYWORDS=ryan+tracy