Lending to US Consumers

measuring consumer lending standards

how easy is to finance your everyday purchases?

Consumer lending

• Lending standards for consumers are now easy at 0.0, easier than a month ago

Easy lending standards will streamline the extension of new loans going forward, supporting economic growth and thus company earnings in the medium term

IntroLending standards are the criteria and practices banks use to evaluate and approve loan applications, determining whether to grant credit and under what terms. They are often influenced by economic conditions, tightening during recessions and loosening during economic booms.

These standards - monitored by the ECB as part of their overall supervision on banking activity - can be used to assess both the borrower's capacity to repay and the potential risks associated with the loan.

Consumer loansWe track demand for credit card and consumer loans without their lending standards, just to purely observe how consumers feel. Higher demand for credit card/consumer loans will stimulate consumption, growth and the economy on one side, but will also highlight a consumer without enough savings to self-finance their purchases. Lower demand will likely indicate slower consumption, but also a better financial position for households.

Mortgages (and chart guide)In the chart above, we also track demand for mortgages with their lending standards. Positive demand for mortgages, associated with easier lending standards, can indicate more home purchases with a subsequent acceleration in future economic growth. Viceversa, negative mortgage demand and tighter mortgage lending standards may anticipate a slow-down in home buying, and subsequently economic growth.

Lending to US corporates

measuring business lending standards

how easy is to get a corporate loan in the US?

Corporate lending

• Lending standards for corporates remain tight at 5.3, and easier than a month ago

Tight lending standards will make it slightly more difficult to get new loans vs normal conditions, negatively affecting consumer spending and thus economic growth in the short term

IntroLending standards are the criteria and practices banks use to evaluate and approve loan applications, determining whether to grant credit and under what terms. They are often influenced by economic conditions, tightening during recessions and loosening during economic booms.

These standards - monitored by the ECB as part of their overall supervision on banking activity - can be used to assess both the borrower's capacity to repay and the potential risks associated with the loan.

Chart guideIn this chart we monitor the latest data available on corporate demand for bank loans (blue area) and we cross it with the current lending standards in EU (yellow line).

Positive demand growth associated with easier lending standards can suggest an acceleration in future economic growth, as companies will likely use the newly lent money for productive investments to grow their sales further. Viceversa, negative loan demand and tighter lending standards may anticipate a slow-down in economic growth.