Banks are reducing the amount some borrowers can run up on their credit cards, especially if they have spotty credit records, according to the October survey of senior loan officers by the Federal Reserve.

Here’s more from the report, which covers the previous three months (emphasis added):

• “About 20 percent of domestic banks, on net, reported having reduced credit limits on existing credit card accounts to prime borrowers; about 30 percent of larger banks and 10 percent of smaller banks had lowered such limits.”
• “Roughly 60 percent of banks had lowered limits on existing credit card accounts of nonprime borrowers; no banks reported raising limits to those borrowers. About 95 percent of banks that had reduced limits cited a less favorable or more uncertain economic outlook and reduced tolerance for risk as reasons for the action. Large majorities of respondents also cited a decline in customer credit scores and missed payments by customers on credit card loans and other loans at their bank.”

Banks also tightened standards on home-loans, but that is to be expected amid record foreclosures. I find more distressing the tighter standards on commercial and industrial lending (C&I), another sign the credit crunch is spreading…

• “About 85 percent of domestic banks—up substantially from 60 percent in the July survey—reported having tightened lending standards on C&I loans to large and middle-market firms over the past three months. About 75 percent of such respondents indicated that they had tightened their lending standards on C&I loans to small firms over the same period, a somewhat larger fraction than in the July survey.”
• “Significant majorities of domestic respondents indicated that they had tightened price terms on C&I loans to firms of all sizes, with notable fractions reporting considerably tighter terms. On net, about 95 percent of U.S. banks reported having tightened the costs of credit lines to large and medium-sized firms, while nearly 90 percent reported such tightening for smaller firms.“

To read the entire grim report CLICK HERE.

And in other news….

• 90% of U.S. banks tighten small-business credit
• 1st rise in O.C. distressed homes for sale since July
• Our financial system ripe for more disasters
• Chase-WaMu to help 400,000 avoid foreclosure
• Gov’t actions fail to ease O.C. mortgage rates
• Free coffee at Starbucks for voting? Get a load of these Election Day dining deals
• Car loans: Tougher to get but terms are good
• O.C. auto sales skid 17% through September
• O.C. home demand up 98% in a year
• Hottest housing news from October

Posted in: Commercial lending • Credit Crunch • Credit stats • Loan underwriting • Meltdown |

You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.