via PragCap
The rapid pace of the decline is especially conspicuous when lending growth is compared across past recession-recovery cycles. Loans have tended to increase on average during the recovery phase. Only in 1990–1993 did loans decline at a comparable pace at this stage of the business cycle.
Tight lending standards have contributed to the decline in loans. Evidence that current lending standards are unusually tight comes from the Senior Loan Officer Survey, which asks officers of large banks how their credit standards for commercial and industrial loans or credit lines have changed over the past quarter. Officers reporting tightened standards have been outweighing those reporting eased standards for over three years. Since standards have been tightening for so long, their current level must be very tight. To see this clearly, we compute an index of how tight lending standards are, using a moving average of the net percentage of those reporting tighter standards. (More precisely, the index is a weighted average of current and past net percentage balances, with larger weights on more recent observations and smaller weights on older observations). This index is currently close to its historical peak, confirming that current lending standards are very tight.
