Dec 1, 2020 - Economy & Business

Banks made it harder for consumers to get loans last quarter

Illustration of piggy bank wearing a robber’s mask

Illustration: Eniola Odetunde/Axios

Loan growth at U.S. banks declined in the third quarter, as banks tightened lending standards and demand from businesses fell.

Why it matters: It's the latest piece of evidence showing that the Fed's programs are helping prop up Wall Street but aren't trickling down to help most everyday Americans.

  • Banks cited the poor economic outlook and a reduced risk tolerance for their decisions to further tighten loan standards. Some banks also pointed to less aggressive competition from other lenders.

Driving the news: Gross loans at the 15 largest U.S. banks, excluding Paycheck Protection Program loans, fell 1% quarter over quarter in Q3, and overall lending saw a 0.9% decline, S&P Global announced Monday.

  • Commercial and industrial loans fell as 14 of the 15 largest U.S. banks reported a decrease.

The big picture: The news followed the Fed's latest survey of senior loan officers on Nov. 9 that showed banks continued to tighten standards for lending despite the Fed's QE4ever program and hundreds of billions of dollars in financing via its special purpose vehicles.

  • For consumers, banks are requiring higher minimum credit scores for credit cards and auto loans.
  • Small businesses are seeing higher collateralization requirements and higher premiums on loans as well as the use of interest rate floors, the survey found.
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