Banks see weaker loan demand, tighter rules

Banks reported weaker demand for loans in the first quarter amid tighter standards spurred by an uncertain economic outlook and lower risk appetite. They expect tighter controls for the rest of the year as they see further deterioration in credit quality.

A Federal Reserve survey of senior loan officers showed that the situation was identical for business loans of commercial and industrial categories. The situation was identical for commercial real estate loans also.

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In the case of loans to households, the lending standards tightened for all categories of residential real estate, except for government-sponsored enterprise-eligible and government residential mortgages, which remained unchanged from the previous quarter.