Apr 4, 2023 - Economy

Lending conditions, term loans tighten "sharply": Dallas Fed survey

illustration of a caution sign surrounded by red and green rectangles with dollar bills overlaid on them

Illustration: Tiffany Herring/Axios

In normal times, surveys on banking conditions are released with little fanfare. Now, there is an increased appetite for data on how banks across the rest of the country are faring.

Why it matters: After the string of recent bank failures, analysts are wondering whether a pullback in lending activity is rippling through the economy.

Driving the news: There is yet another clue now, after the release of a survey of some banks and credit unions based in the Dallas Fed's district covering Texas and parts of Louisiana and New Mexico.

  • The latest survey — conducted in the weeks after the collapse of Silicon Valley Bank and Signature Bank — showed lending conditions and terms for loans tightened "sharply," with "marked rises in loan pricing," according to the Dallas Fed.

By the numbers: An index for credit standards and terms slumped to -36, from -30 in February, suggesting more respondents reporting that they were continuing to tighten up on lending.

  • The overall loan volume index plummeted to -18, from 5 in the prior survey. Most respondents reported no change in general business activity in the past six weeks, but an overwhelming share expect activity to slump in the next six months.

What they're saying: In comments collected by the Dallas Fed, one official said that the recent banking strain has "resulted in a crisis of confidence in our banking system. The additional macro impact of interest rate hikes has put the economy in a hard-landing recession."

  • Another added: "Our commercial customers are having sticker shock when their three- or five-year rate adjustments are coming due. Pricing for good commercial loans is getting very competitive."
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