Banks Predict Tougher Loan Conditions and Tighter Credit Standards in 2023

Lending conditions at U.S. banks are tightening and expected to become even stricter, according to a Federal Reserve survey. Banks anticipate further tightening of lending standards due to a less favorable economic outlook, expected deterioration in collateral values, and credit quality of loans. Consumer lending standards have been tightened for credit card loans and other consumer loans, with lower credit limits and higher minimum credit scores for personal loans. In the commercial and industrial lending segment, banks have seen lower demand for loans and have imposed more restrictions on standards. The Federal Reserve continues to raise interest rates despite acknowledging the tight credit conditions in the economy.