Underwriting standards continue to tighten

Northwestern Financial Review, Aug 1-Aug 14, 2002

For the second year in a row, banks tightened underwriting standards for commercial and retail loans, according to the Office of the Comptroller of the Currency. The agency said that tightened standards were largely a response "to a slowing economy and pockets of deteriorating product performance." Structured finance and syndicated/national loans experienced the most tightening in the 12 months that ended March 31, with nearly 60 percent of surveyed banks reporting stricter standards for those products.

To tighten commercial standards, banks most often changed pricing, covenants, collateral and credit lines, wrote the agency. Standards in retail underwriting were more stable than those in commercial underwriting. Still, 39 percent of the banks said they tightened retail standards, against 32 percent in the previous survey.