OCC Survey Shows Banks' Underwriting Standards Continuing to Ease

WASHINGTON — The Office of the Comptroller of the Currency’s 19^th Annual Survey of Credit Underwriting, released today, shows that underwriting standards are continuing to ease, with easing noted within both commercial and retail products.

Banks continued to adapt to changing economic conditions and competition.  Examiners noted easing underwriting standards and increasing loan volume.  Examiners reported banks’ increasing risk appetite and greater market liquidity were factors that contributed to easing standards.  Large banks, as a group, reported the highest share of eased underwriting standards.  Loan portfolios that experienced the most underwriting easing included indirect consumer, credit cards, large corporate, asset-based lending, international, and leveraged loans.  Loan portfolios that experienced the most underwriting tightening included high loan-to-value home equity and conventional home equity.

“This year’s survey showed a progression toward easing underwriting standards as the economic environment stabilizes,” said John Lyons, Senior Deputy Comptroller and Chief National Bank Examiner.  He went on to indicate “that as banks ease standards to improve margins and compete for limited loan demand, examiners will continue to monitor underwriting standards to ensure they are prudent and are applied consistently regardless of whether loans are underwritten to hold or distribute.”

Banks should ensure appropriate attention to underwriting, loan structures, and loan administration as competition and the anxiety for earnings can lead to heightened risk.  This point is especially notable for loan products that have already seen easing such as leveraged lending, asset-based lending, indirect consumer lending, and credit cards.

The survey is a compilation of examiner observations and assessments of credit underwriting standards.  The 2013 survey included 86 of the largest national banks and federal savings associations and covers the 18-month period ending June 30, 2013.  The survey covered loans totaling $4.5 trillion representing approximately 87 percent of total loans in the national bank and federal savings association system.

Related Link

• 19^th Annual Survey of Credit Underwriting (PDF)