Party like it’s 2008: Banks will get go wild on lending and gambling again, and you get to bail them out if things go wrong

Wednesday, December 17, 2014
By Paul Martin
December 17th, 2014

Banks loosen lending standards to levels seen before financial crisis

The largest U.S. banks have lowered their standards for some of the riskiest lending in a sign that weak underwriting is returning to levels seen before the 2008 financial crisis, according to a regulator’s report.

The banks have continued to erode standards, especially in large corporate loans, consumer loans and in leveraged lending, according to an annual Office of the Comptroller of the Currency survey of examiners released Tuesday. Leveraged lending is the risky financing often used to fund corporate buyouts.

“As banks continue to reach for volume and yield to improve margins and compete for limited loan demand, supervisors will focus on banks’ efforts to maintain prudent underwriting standards,” said Jennifer Kelly, the OCC’s chief national bank examiner. She said the trends are “very similar” to those from 2004 through 2006.

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