The April 2012 Senior Loan Officer Opinion Survey on Bank Lending Practices addressed changes in the supply of, and demand for, bank loans to businesses and households over the past three months. This summary is based on responses from 58 domestic banks and 23 U.S. branches and agencies of foreign banks.

Domestic banks reported that their credit standards on C&I loans to both large and middle-market firms and to small firms were little changed over the first quarter of 2012. However, for the third consecutive quarter a small net fraction of U.S. branches and agencies of foreign banks reportedly tightened their standards on C&I loans.

Moderate to large net fractions of domestic banks eased many terms on C&I loans to firms of all sizes. A large net fraction of respondents indicated that they had decreased spreads on C&I loan rates over the cost of funds to both large and middle market firms and to small firms. A sizeable net fraction of banks also indicated a reduction in their use of interest rate floors and reduced costs of credit lines.

Almost all domestic banks that reported having eased standards or terms on C&I loans cited more-aggressive competition from other banks and nonbank lenders as a reason for having done so, with fewer than half of the banks that reported having eased standards attributing the change to an improved or less uncertain economic outlook. The few banks that reported having tightened at least one C&I loan term cited a variety of reasons, including a less favorable or more uncertain economic outlook, a worsening of industry-specific problems, a reduced tolerance for risk, and increased concerns about legislative, supervisory, or accounting policies.

For the second straight survey, reports from domestic banks of stronger demand for C&I loans outnumbered reports of weaker demand. Domestic banks also reported that the number of inquiries from potential business borrowers regarding new or increased credit lines increased, on net. Banks reporting stronger demand cited shifts in borrowing from other bank and nonbank sources, as well as increases in customers' funding needs related to inventories, investment in plant or equipment, accounts receivable, and mergers and acquisitions as important factors underlying the increase. The small fraction of banks indicating that demand had decreased cited an increase in their customers' internally generated funds, as well as decreases in customers' funding needs related to inventories, investment in plant or equipment, and accounts receivable. In contrast, a small net fraction of foreign respondents saw weaker demand for C&I loans, and those that did most often cited customers' decreased investment in plant and equipment and reduced financing needs for merger or acquisition activity.