Bloomberg Businessweek reported U.S. bank credit is growing at the fastest pace in three years, giving the Federal Reserve confidence in the economic expansion's staying power.

According to the report, financial institutions increased commercial and industrial loans by an average annual pace of almost 10% in the third quarter, the highest since the comparable quarter in 2008, compared with a 1.7 % decline in the past four years, according to Fed data. The latest numbers show loan growth of 15%, seasonally adjusted, in October and 6.1% in November.

As reported. Banks eased lending terms in 2011 after raising levels of equity capital following 2009 Fed stress tests and reducing losses stemming from the housing slump and deepest recession since the 1930s.
 
Fed officials cited commercial lending as a bright spot during the Nov. 1-2 Federal Open Market Committee meeting, saying it “accelerated” beyond “strong increases” in the first half of the year, based on the minutes published Nov. 22. Domestic banks have loosened standards for eight consecutive quarters, according to the Fed's October 2011 survey of senior loan officers released Nov. 7.

“We are looking at a clear upward trend in bank lending to businesses, and that to me has been the missing link,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, New York. “If that continues, and I think it will, then I think that the small-business sector, which has been in a horrible, horrible state, will really contribute strongly to growth next year.”