Federal Survey shows US banks are tightening credit to Europe

MORE than two-thirds of banks in a Federal Reserve survey of senior loan officers said they had tightened credit to European financial firms in January, underscoring the continent’s banking crisis.

The survey, published yesterday, also found US banks snapping up business from their beleaguered European competitors, scotching claims new regulations are hurting Wall Street competitiveness.

“About half of the respondents who reported competing with European banks noted such an increase in business,” the Fed stated.

The report also noted “more widespread tightening of standards” to non-financial firms that have US operations and significant exposure to European economies.

US policymakers are worried that a freeze in bank lending in Europe could spill over to the United States, threatening its own economic recovery.

But the findings painted a comparatively benign picture of US credit markets. Domestic lending standards were largely unchanged for January, while loan demand edged upwards.

Meanwhile demand for home equity loans fell – a sign of the housing sector’s persistent weakness.