The Federal Reserve’s quarterly Senior Loan Officer Opinion Survey on Bank Lending Practices, or SLOOS, showed that US banks reported tighter credit conditions and weaker loan demand across all loan types.

Regarding loans to businesses, respondents reported tighter standards and weaker demand for commercial and industrial (C&I) loans to firms of all sizes over the second quarter. Meanwhile, banks reported tighter standards and weaker demand for all commercial real estate (CRE) loan categories.

Looking at standards for C&I loans, there are only two times it has been more difficult to get a C&I loan for small businesses in the past three decades: during Covid and the global financial crisis.

For loans to households, banks reported that lending standards tightened across all categories of residential real estate (RRE) loans, especially for RRE loans other than government-sponsored enterprise (GSE)-eligible and government loans.

Meanwhile, demand weakened for all RRE loan categories. In addition, banks reported tighter standards and weaker demand for home equity lines of credit (HELOCs).

Standards tightened for all consumer loan categories; demand weakened for auto and other consumer loans, while it remained largely unchanged for credit card loans.

Looking at the second half of the year, banks reported they expect to further tighten standards on all loan categories.

“The most cited reasons for expecting to tighten lending standards were a less favorable or more uncertain economic outlook, an expected deterioration in collateral values, and an expected deterioration in credit quality of CRE (commercial real estate) and other loans,” the Fed said.

Additionally, banks cited an expected reduction in risk tolerance, an expected deterioration in their liquidity position, increased concerns about funding costs and deposit outflows, as well as increased concerns about the effects of legislative, supervisory, or accounting changes as reasons for expecting further tightening.