Washington The Office of the Comptroller of the Currency
(OCC) reported today that commercial loan standards eased over the past year,
particularly in the areas of structured finance and syndicated/national
loansareas that had shown the greatest tightening in the four prior years.
The OCCs tenth annual Survey of Credit Underwriting
practices also noted that slightly more banks eased credit underwriting
standards than tightened them.
Examiners reported that 13 percent of banks eased, 12 percent tightened,
and 75 percent did not change their commercial standards. In 2003, by contrast, many more banks
tightened than eased; examiners reported that 47 percent of banks tightened and
only 5 percent eased. The survey found
that underwriting standards for retail credit products also reflected more
easing and less tightening, but the change from prior years was less
pronounced. Most of easing of retail
standards was centered in credit cards and home equity products.
It is not surprising to find some adjustments to
underwriting criteria due to improved loan portfolio quality, stepped-up
competition and a more optimistic economic outlook, said Barbara Grunkemeyer,
Deputy Comptroller for Credit Risk. However,
ambitious growth goals in a highly competitive market can create an environment
that fosters imprudent credit decisions.
We are seeing that the products that have experienced the most easing
are the same products that experienced the most volatility during the recent
credit cycle. Banks need to be
disciplined and adhere to the enhanced credit risk management practices they
implemented in the past few years.
The 2004 survey included the 72 largest national banks, that
have assets of $2 billion or greater and covered the 12-month period ending
March 31, 2004. The aggregate loan
portfolio of the surveyed banks was approximately $2.3 trillion and represents
91 percent of all outstanding loans in national banks.
Much has changed in ten years, and banks are in a better
position to evaluate and manage the risk associated with easing underwriting
standards, said Ms. Grunkemeyer.
Advances in credit risk management have given banks better tools to
differentiate risk and understand the implications of underwriting changes.
Ms. Grunkemeyer emphasized that the OCC will continue to
focus supervisory attention and resources to ensure that credit risk in
national banks is appropriately identified and that credit risk management
practices are commensurate with risk levels.
This Survey of Credit Underwriting Practices 2004 can be
found on the OCC web site at: www.occ.treas.gov.
The OCC charters, regulates
and examines approximately 2,000 national banks and 51 federal branches of
foreign banks in the U.S., accounting for more than 56 percent of the nations
banking assets. Its mission is to ensure a safe and sound and competitive
national banking system that supports the citizens, communities and economy of
the United States.