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To: Giraffe who wrote (23167)	11/20/1998 4:35:00 PM
From: goldsnow	Read Replies (1) \| Respond to of 116791

Survey: Banks Stricter on Loans Friday, 20 November 1998 W A S H I N G T O N (AP) A SURVEY of bank lending by the Federal Reserve this month found "a broad tightening of business lending practices" as bankers grew increasingly concerned about the economy's prospects. Bankers' wariness was growing even though the Federal Reserve, at the time of the survey, had twice cut short-term interest rates in an effort to support investor and consumer confidence. The findings, reported today, almost certainly played a role in Fed policy-makers' decision Tuesday to cut rates a third time, bringing the benchmark rate on overnight loans between banks to a four-year low of 4.75 percent. "The survey results suggest a broad tightening of business lending practices," the Fed said. "Citing increased concern over the economic outlook, a large share of the participants indicated they had firmed standards and terms on loans to large and middle-market businesses and on commercial real estate loans." The Fed first detected tightening credit conditions in a survey in mid-September, after the U.S. stock market plunged during a wave of financial turmoil that swept the globe following the collapse of the Russian ruble. As with the September survey, the latest check "found little evidence of any changes in lending practices on loans to households." A few banks said they actually had become more willing to make consumer installment loans while a "moderate percentage" said they had tightened standards on credit cards. In September, large businesses were most affected by tighter credit. But, this month, the difficulties definitely had spread to medium-sized business borrowers and "some banks also reported having tightened standards and terms on loans to small businesses. The Fed questioned senior loan officers at 55, mostly large, banks, who represent nearly half the industry. More than a third of the U.S. banks and two-thirds of the foreign-owned banks said they had adopted stricter standards for lending to large and medium-sized American companies. In September, only a quarter of the U.S. banks and two-fifths of the foreign banks had tightened. "A less favorable or more uncertain economic outlook was the most commonly cited reason for having tightened," the Fed said. "Many banks also cited ... industry-specific problems, a reduced tolerance for risk, and less aggressive competition from other banks and nonbank lenders." In fact, the survey showed that demand for both business and commercial real estate loans had increased because businesses were having trouble raising money in the stock and bond markets. Bankers also told the Fed that most of their business customers were making satisfactory progress in fixing their Year 2000 computer problems. But many U.S. banks said, because of Year 2000 concerns, they had started to become more careful about lending to other banks in Japan and a few had restricted their lending to banks in Europe.