Easing, not getting easier, but easing. The April/May Federal Reserve senior loan officer opinion survey notes that both credit standards and loan terms to commercial and industrial (C & I) borrowers continue to ease, with the percentage of domestic banks tightening C & I lending standards continuing to moderate (with fewer banks reporting tightening standards) as shown in the following chart:




Net Percentage of Domestic Banks Tightening C & I Lending Standards

Q3 2009


Q4 2009


Q1 2010


Q2 2010


Q3 2010


Q4 2010


Q1 2011


Q2 2011


During the quarter, demand for both C & I loans and commercial real estate loans also strengthened, especially at large commercial banks.

For the first time since the fourth quarter of 2005, commercial banks, on a net basis, eased lending standards for commercial real estate loans. Not surprisingly, demand for commercial real estate loans strengthened during the quarter with a net 34.5 percent of banks reporting stronger demand for commercial real estate loans as compared with only 12.3 percent in the first quarter of 2011.

One would sense we are at or near an inflection point, with commercial banks showing an increasing willingness to extend credit to both small and large business and household borrowers alike. This is especially encouraging as an expansion of credit to small businesses will allow for additional hiring, a key driver of the projected economic recovery.