Fed reports loan demand falling while margins tighten

Northwestern Financial Review, Nov 15, 2001

The Federal Reserve Board has issued a report that says banks are facing extremely tight interest rate margins, falling loan demand, and further increases in delinquencies and non-performing loans. "Banks ... reported that their net interest margins have become very tight as market interest rates have eased," said the Fed.

"Several indicated that they cannot reduce deposit rates further without risk of losing balances." The Fed reported that commercial loan demand had slackened in several areas, particularly in the Richmond, New York, Chicago and St. Louis districts. The report, which covers six weeks through Oct. 15, said businesses are concerned about the slumping economy and an uncertain outlook due to the attacks on the World Trade Center and the Pentagon.