Fed Says Some Banks Tightened Oil Loans, Saw Auto Loan Risk

The Federal Reserve said some banks tightened standards or terms to energy-industry borrowers in the fourth quarter, after the price of oil plunged.

U.S. banks “reported little change in their standards” for commercial and industrial loans overall, the Fed said today in its Senior Loan Officer Opinion Survey, conducted Dec. 30 to Jan. 13 with 73 domestic banks and 23 U.S. branches of foreign banks.

“Banks which reported having tightened either their standards or terms on C&I loans predominantly pointed to industry-specific problems as the main reason for having tightened their lending policies to non-financial businesses,” the Fed said. “Some survey respondents specifically noted their concerns about the oil and gas sector resulting from the sharp decline in the price of oil as a reason that they had tightened their lending policies.”

West Texas Intermediate crude futures for March delivery declined below $45 a barrel last week to the lowest levels since March 2009. Oil prices are down from more than $107 in June.

For consumer loans, few banks said they eased standards for auto loans, while standards for credit card applications and other consumer loans were about unchanged. Most banks said they expect delinquency rates on credit card and prime auto loans “would remain around current levels.”

Banks anticipated more risk with sub-prime car loans, with 71 percent saying they expect loan quality to be unchanged while 29 percent said “loan quality is likely to deteriorate somewhat,” according to the Fed survey. On auto loans to prime borrowers, 82 percent of banks said the quality will remain about the same while 11 percent said it’s likely to deteriorate.

Motor vehicle loans in the U.S. climbed to $944 billion as of the third quarter after increasing 35 percent over four years, according to Fed data.

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