The US Federal Reserve Board has released its July 2010 Senior Loan Officer Opinion Survey on Bank Lending Practices. The survey addresses changes in the supply of, and demand for, bank loans to businesses and households over the past three months.

The July survey indicates that, on net, banks had eased standards and terms over the previous three months on loans in some categories, particularly those categories affected by competitive pressures from other banks or from non-bank lenders. While the results suggest that lending conditions are beginning to ease, the improvement to date has been concentrated at large domestic banks. Most banks reported that demand for business and consumer loans remain unchanged.

However, this is the first survey that has shown an easing of standards on commercial and industrial (C&I) loans to small firms since late 2006. Significant net fractions of domestic banks reported that their pricing of C&I loans has eased to firms of all sizes.

Banks pointed to increased competition in the market for C&I loans as an important factor behind the recent easing of terms and standards. However, there was only a small change in demand for C&I loans from large and middle-market firms and from small firms, on net, over the survey period. This was after declining over the three months prior to the April survey.

On net, large domestic banks reported an easing on standards and terms on almost all of the different categories of loans to households. Other banks showed either a smaller net fraction having eased lending policies or a net tightening of lending policies. Regarding residential real estate lending, a few large banks reported having eased standards on prime mortgage loans, while a modest net fraction of the remaining banks reported tighter standards on such loans.

Banks reported an increased willingness to make consumer instalment loans, on balance, for the third consecutive quarter, and a small net fraction of banks reported having eased standards on both credit card and other consumer loans. By contrast, a small net fraction of respondents reported tighter terms and conditions on credit card loans.

The survey is based on responses from 57 domestic banks and 23 US branches and agencies of foreign banks.