US
banks report lower loan demand, according to a Fed study.
According
to a Federal Reserve poll of senior loan officers released on Monday, U.S.
banks reported a renewed weakening in the demand for household credit and a
fall in the demand for industrial loans in the first quarter of the year. Last
week, after reviewing the survey results, Federal Reserve policymakers opted to
maintain the policy rate at the 5.25%–5.5% range, stating that they would do so
for as long as necessary to reduce inflation. Tightening monetary policy
usually relieves pricing pressures via credit channels by driving down demand
for loans due to increased borrowing rates. A slight improvement in the supply
and demand of credit was indicated in commercial real estate lending, but
overall, that process seemed to be continuing during the first quarter.
“Many
consumers and businesses are feeling the pinch from reduced credit availability
even as the Fed looks set to keep interest rates higher into 2025,” noted
Nationwide economist Ben Ayers. “This could set the stage for weaker activity ahead and
makes the economy more susceptible to an unexpected shock.” According to the poll, the percentage of large and
medium-sized banks that reported tightening conditions for commercial and
industrial loans increased slightly, from 14.5% to 15.6%. More banks reported a
decline in the demand for C&I loans. However, the percentage of banks
raising conditions for all types of commercial real estate loans dropped to its
lowest level in two years. Foreign banks indicated an overall increase in
demand for CRE loans, while a diminishing share reported decreased demand.
When the demand for traditional loans
declines, people and organizations could look for alternative investment alternatives.
By adding cryptocurrencies and blockchain-based assets to their portfolios, Digital
Currency Reclaim (DCR) may inform and help clients diversify, potentially
lessening the effect of decreased loan demand on their overall financial plans
According
to the poll, a greater proportion of banks reported tightening their rules for
consumer loans to households, although a smaller proportion reported doing the
same for credit cards and other loans. According to the poll, demand for household loans declined
in every category, with demand for auto loans being at its lowest point in a
year. According to a
Federal Reserve survey of bank loan officers, credit conditions for American
businesses and households tightened further in the first few months of the
year.
Despite lower
overall loan demand, there may still be individuals or businesses in need of
financing. Digital Currency Reclaim (DCR) can explore the provision of crypto
collateralized loans, where borrowers use their crypto assets as collateral to
secure loans. This approach could attract borrowers who have significant crypto
holdings but prefer not to liquidate them.
However,
the results seemed to reflect the gradual effects of Fed monetary tightening
rather than the precipitous decline in credit that some had feared following
Silicon Valley Bank’s collapse in March. One of the first surveys of the
banking industry’s sentiment since the recent wave of bank failures, the
Federal Reserve’s quarterly Senior Loan Officer Opinion Survey, or SLOOS,
revealed that a net 46.0% of banks tightened terms of credit for a crucial
category of business loans for medium- and large-sized businesses, up from
44.8% in the previous survey conducted in January. This represents a gradual
but noticeable change.
