OCC Survey Finds Bank Underwriting Standards Tighten

WASHINGTON — The Office of the Comptroller of the Currency released today its 14th annual Survey of Credit Underwriting Practices and reported that commercial and retail underwriting standards tightened after four consecutive years of eased underwriting standards.

The 2008 survey included examiner observations and assessments of credit underwriting standards at the largest national banks. The survey reflected that the disruption in financial markets that began in 2007 led to an abrupt change in risk appetite of the majority of the banks and a renewed focus on fundamental credit principles by bank lenders.

Examiner assessments found that risk in both the commercial and retail portfolios increased over the past year and they expect portfolio risk to continue to increase over the coming year. Key factors that contributed to the rise in product and portfolio credit risk were the weakening economy, rising energy costs, turbulence in the secondary credit markets, the downturn in the housing market, and the anticipated impact of relaxed underwriting standards over the past few years on payment performance.

The 2008 survey included the 62 largest national banks and covered the 12-month period ending March 31, 2008. The aggregate total of loans was $3.7 trillion, which represented over 83 percent of all outstanding loans in the national banking system.

The survey can be found here on the OCC's Website.