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Credit and Financial Stress
US banks’ lending standards for businesses
49neutral
Now 0.0% | Data for Q3 2026
Hot and cold describe position, not good or bad: warm does not mean a fall is coming, and an extreme reading does not mean a quick reversal. We describe history only, with no buy or sell advice.
What it is
Lending standards: what is measured, and why it matters
What it measures
Each quarter the Fed asks senior bank loan officers about business lending: the share tightening standards for large and mid-sized firms, minus the share easing them.
Why it matters
When banks tighten lending, borrowing becomes harder and costlier for companies, and this often comes before investment and hiring weaken.
Share of banks tightening standards on business loans minus the share easing them; higher = more banks tightening.
Where it stands now
Position over time
Data: Federal Reserve Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS), via FRED (Federal Reserve Bank of St. Louis). Positions: our calculation.
coldcoolneutralwarmhotHatched = earlier periods that were also neutral
Short sample: positions start only in 2000 (less than 30 years), so conclusions should be more cautious.
Q1 2026–now3-quarter period, neutral in 2 of those quartersStill under way
For each period, the changes 1, 2 and 3 years after it began are cumulative and measured from its first month; “What happened next” is measured from every neutral month, so the two give different numbers. The events named beside each period are major events of that time, not necessarily related to the readings here.
What happened next
How US stocks moved after earlier months with Lending standards neutral
Bars: median cumulative changeEarlier quarters with Lending standards neutral, excluding the current period (19)All quarters (107)
1 yr later
+12.5%down in 32% of cases
+11.3%down in 24% of cases
3 yr later
+30.6%down in 17% of cases
+30.7%down in 19% of cases
5 yr later
+61.6%down in 18% of cases
+55.8%down in 21% of cases
Median of the deepest drop below the starting month within the next 5 years: −6.1% for months with Lending standards neutral; −8.1% for all months.
The neutral months come from a small number of market episodes (8), and neighboring months are not independent events; rises and falls are all listed. This is the historical record, not a forecast. “US stocks” means the S&P 500 price index compiled by Professor Shiller (monthly average, excluding dividends).
Where Lending standards went next
Later positions of Lending standards, after past months that were neutral, like now
Median position
Back to neutral (40–60)
Still neutral
1 yr later
64warm
5%
5%
3 yr later
50neutral
17%
17%
5 yr later
62warm
24%
24%
Has hot or cold lined up with later returns?
No clear link in the past
2000–2021: average yearly change in US stocks over the next 5 years
Hottest 20%
+5.8%a year
All months
+7.4%a year
Coldest 20%
+4.8%a year
There is no clear relationship between hot or cold and what came next. The gaps between the bars are not consistent across months (rank correlation below 0.25); this is a record of the past, not a forecast.
When banks tighten lending, borrowing becomes harder and costlier for companies
This issue: Lending standards at 49 (neutral), Credit spread at 9 (cold) — at least one is in the neutral range (40–60), so we make no call this issue.
●○○Not visible in our dataAgreement +0.09 · in step in 3 of 4 5-year periods
In most periods the two moved the way the common explanation says, but their highs and lows do not line up over the whole history, so overall no relationship is visible.
Values
Values over time
Unit: %. Data: Federal Reserve Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS), via FRED (Federal Reserve Bank of St. Louis).
Data and sources
Where the data come from and how they are calculated
Source
Federal Reserve Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS), via FRED (Federal Reserve Bank of St. Louis)
Frequency
Quarterly
Positions start
Q1 2000 (short sample)
Method
Position = the percentile of the value itself within its own history