Fed report shows US banks concerned about tighter conditions

ISTANBUL

The US Federal Reserve said Monday that American banks are concerned about tighter conditions due to weak economic outlook and deposit outflows.

"In comparison to the largest banks, mid-sized and other banks more frequently cited concerns regarding their liquidity positions, deposit outflows, and funding costs as reasons for tightening," the Fed said in its Senior Loan Officer Opinion Survey on Bank Lending Practices report.

"Major shares of mid-sized banks cited the economic outlook, reduced tolerance for risk, concerns about the bank's liquidity position, deterioration in collateral values, deterioration in credit quality of loan portfolio, bank funding costs, and deposit outflows as reasons for tightening," it added.

While the Fed said banks reported tighter standards and weaker demand for all commercial real estate loan categories, it said banks also reported that lending standards tightened across all categories of residential real estate loans as well.

In order to fight inflation, the Fed has raised its benchmark interest rate a total of 500 basis points in last 14 months, which caused overall tighter credit conditions.

Three American banks have seen sudden collapse since March – Silicon Valley Bank, Signature Bank, and First Republic Bank – while Pacific Western Bank said last week it has been exploring asset sales.