District Circular Letters
July 13, 1998
BANKING SUPERVISION AND REGULATION:
LENDING STANDARDS FOR COMMERCIAL LOANS
INTERNET LISTING OF APPRAISERS
To State Member Banks, Bank
Holding Companies, Edge Act Corporations,
U.S. Branches and Agencies of Foreign Banks,
and Others Concerned
in the Twelfth Federal Reserve District
Supervisory Staff Report Regarding Changes in Bank Lending Standards
The Federal Reserve, in response to concerns raised within both the
banking industry and the supervisory community, recently undertook an
intensive study of lending terms and standards. This study, involving
several hundred loans throughout the country and many of the Federal Reserve's
most experienced examiners, compared loans made in late 1995 with loans
made in late 1997. The study concluded that intense competition for loan
customers has led to significant easing of pricing and some non-price
terms, but that, on balance, the overall quality of loans being made has
in general not changed significantly over the period, due in large measure
to favorable economic conditions.
To assist examiners in their evaluations of the quality of credit risk
management processes within banking organizations, the Federal Reserve
has developed additional guidance reflecting the information gained by
the study. The enclosed supervisory letter (SR 98-18
[SUP]) outlines the new guidance, including
- the indications of easing in bank lending;
- the Loan Quality Assessment Project itself;
- issues identified by the project as warranting increased supervisory
attention; and
- certain sound practices in loan underwriting and approval processes
that contribute to maintaining an institution's loan quality.
The guidance is in keeping with the risk-focused frameworks for the
supervision of community banks and large complex banking organizations.
Enclosed with the SR letter is a supervisory staff report entitled "The
Significance of Recent Changes in Bank Lending Standards: Evidence from
the Loan Quality Assessment Project," describing the project's findings
in more detail.
New FFIEC Internet Site Listing State Certified or Licensed
Appraisers
The Appraisal Subcommittee (ASC) of the Federal Financial Institutions
Examination Council (FFIEC) has announced the creation of an Internet
site containing the National Registry of State Certified or Licensed Appraisers
(Registry), at http://www.asc.gov.
The Registry provides an up-to-date listing of State certified or licensed
real estate appraisers eligible to perform real estate appraisals for
federally related transactions. The Registry will be updated at least
monthly, based on information provided by each state and territory. The
enclosed ASC advisory letter contains additional background on the new
Internet site.
Additional Information
For additional information regarding these matters, please contact our
Banking Supervision and Regulation Department, at (415) 974-2929.
FEDERAL RESERVE BANK OF SAN FRANCISCO
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