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Lenders had started tightening as early as the fourth quarter in anticipation of a possible recession. Now, the banking crisis is driving community and regional banks in particular to hit the brakes harder, stoking renewed recessions fears.
A new Risk Management Association survey found that 84% of small lenders cite credit quality as a leading worry for 2023 because of the likelihood of a recession.
Dicier credit conditions, recession fears and tougher regulatory scrutiny combined to weaken merger activity in 2022. A push for scale is bound to resume when interest rates level off — at least among smaller banks, analysts say.
So far this year, banks have reported that borrowers continue to repay their loans and delinquency rates remain low. But there are signs that this may change.
Bank lending activity grew at a strong clip in the second quarter and continues to expand. Yet rising interest rates and recession concerns could hamper future growth.