Senior Loan Officer Opinion Survey on Bank Lending Practices (SOSLP)

What It could mean?

The need for this is to get a clearer picture of credit and lending decisions over setting interest rates and discount rates. The survey result is accomplished by the senior loan officer opinion survey on bank lending practices. However, this movement is administered by the aegis of the Federal Reserve Board at which takes a complete survey from Senior Loan Officer and discussed at the quarterly Federal Open Market Committee meetings.

Senior Loan Officer Opinion Survey on Bank Lending Practices (SOSLP)

However, this officer is a voluntary quarterly survey, which is completed by banks. Policymakers such as FOMC make use of these surveys to make decisions on setting interest rates and discount rates. This is because it contains the. Responses of personnel from 80 domestic banks and 24 branches and. Reports from agencies of foreign banks under operation with the United States. The survey report also contains the Fed’s reports to Congress on the. Availability of Credit to Small Businesses. However, this is done every five years. Nevertheless, the SOSLP often receives extension coverage from the. Business press and from the academic community.

Duty of the SOSLP

To gather information on how officials feel about the. Recent policy changes, the standards and terms of banks’ lending practices. The household demand for loans, and other products with respect to. Current interest and state of the business.

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Issues resolved here concerns topics on both personal. And commercial bank customers. One of the most recent topics was on the. Changes in the available lines of credit and the use of interest rate floors. Considered in for floating rate loan agreements (over businesses). Consumers were also factored-in concerning the “issues as loans in areas with falling. Energy and the impact of credit scores on credit card applications.

This whole practice by Fed took hold back in 1964. Since then, the survey has been adjusted. And the number of responses fluctuated. This is approved to be conducted up to six times a year but it has always. Been four surveys per year since 1992.

Note:

the major focus brought about by this SOSLP is. Reflecting on the bank’s personnel’s outlook concerning their loan. Standards and availability of credit in the future.

Banks must have at least $2 billion in assets. When it was finally reduced from $3 billion in 2012. More so, the commercial and. Industrial loans must qualify at least 5% of those assets. About two to ten banks. Are included from each Federal Reserve District because of the purpose of. Geographic diversity.

However, the survey includes 25 questions which cover the SOSLP. This started in the past few months. From the responses, more are coming in the next quarter and year. We could picture out some quantitative, responses, and some qualitative as well from the responses/queries. These queries are fashioned to cover timely topics such that the Fed will be provided with Basel III OR even the impact of the 2008 and 09 subprime mortgage meltdown.

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WHAT YOU SHOULD KNOW

  • Do you know that in January 2019, SOSLP changed the standards and terms of bank loans to businesses and households? The response was received from 73 domestic banks and 22 foreign banks. This reflected only on loans to businesses as banks tightened their standards while the terms for commercial and industrial loans remained unchanged.
  • Do you know that the consumer loan standard increased for credit card standards? The same goes for residential real estate loans.
  • Do you also know that banks reported to also increase the standards of other categories of business loans because of what they can forth-tell from the future? This report also has affected credit card loans and jumbo mortgages as they expect the decline in the value of the collateral.

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