The US Office of the Comptroller of the Currency (OCC) reports that the trend of tightening underwriting standards has continued for the last three years. However, it is beginning to see some easing of standards in response to competition and a slight improvement in credit market liquidity.

Credit and market risk deputy comptroller Dave Wilson says: "Credit performance remains a concern, despite several years of tightening. We are beginning to see some recent signs that standards may be loosening. That's good for credit markets, as long as bankers remember to stick to sound underwriting principals and do not compromise standards because of competitive pressures or the assumption that loans will be sold to third parties."

Despite tightened underwriting standards, examiners note that risk in both the commercial and retail portfolios increased for the third consecutive year, with portfolio risk expected to increase over the coming year. This increase was largely due to the combined effects of loans, previously underwritten with more liberal standards and coupled with continued economic weakness.

This year's survey also indicated that the majority of banks are using the same underwriting standards, regardless of whether they intend to hold or distribute credits.

The survey included 51 of the largest national banks and covered the 12-month period ending 31 March 2010. The aggregate total of loans was US$4trn, which represented over 93% of all outstanding loans in the US banking system.