Faced with tepid loan growth and heated competition for clients, banks are sweetening their deals on loans to businesses, a development that is concerning regulators, The Wall Street Journal reports.
Lenders are giving corporate borrowers lower rates and looser terms, even if they operate in industries that are under strain, according to regulators and an analysis of lending data by the newspaper. It’s good for businesses looking to borrow cheaply, but the Office of the Comptroller of the Currency identified the easing of commercial loan standards as a top risk in the industry in a report last week.
As a result of the changes in lending, OCC has issued more citations in the last year. Citations involving underwriting commercial loans rose 24% from the first quarter of 2017 through the first quarter of 2018, the agency says. Citations involving banks making exceptions to their typical policies governing commercial lending rose 45% over that same period.
Banks aren’t necessarily diving back into the riskier categories of business loans that they gave up after the crisis. Instead, they are becoming more aggressive in making the types of loans they consider safe, recent lending practices show.
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