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Banks Reluctant to Introduce Loan Hurdles Due to Low Demands PDF Print E-mail
Thursday, 25 February 2010
With the exception of commercial real estate loans, applying for a loan is not getting more difficult. In a survey released by the Federal Reserve Monday, there is information revealing that banks are not introducing additional steps for individuals and businesses trying to obtain loans. The additional requirements that have been introduced during the past two years of the financial crisis remain in place, however.

The Federal Reserve voted to continue low interest rates to continue to bolster the fledgling economic recovery. Noting that bank lending has not increased, President Obama has urged bankers to increase lending. Bankers maintain that fewer loans have been given because of a reduction in demand by consumers wary of assuming debt in the current economy. The rate of unemployment and that status of the economy have resulted in fewer requests for home mortgages and consumer loans. Reluctance by consumers to spend money on big ticket items accounts for the projected modest economic recovery.


Banks are anticipating less of a reduction in the value of loans they hold in the upcoming year, but believe that the credit quality of borrowers obtaining primary and secondary mortgages will continue to decline. Banks expect that the credit value of other types of consumer loans will not erode in 2010. This signifies a measurable improvement from the last two years.

Commercial real estate loans will continue to be problematic for banks of all sizes. Smaller banks are particularly prone to difficulties given the declines in the commercial real estate market. The bad debts held by smaller banks often result in a contraction of available credit to small businesses. As small businesses are the economic engine that drives job creation, the contraction of available credit will retard the economic turn around, as businesses may not be able to expand facilities or increase the numbers in their workforce.

bank loans
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