The latest available bank lending standards data from the Federal Deposit Insurance Corporation (FDIC) indicate that many types of banks have to some degree relaxed their commercial and industrial (C&I) lending standards in the U.S. in the early months of 2021. Easing standards allow for the great flow of credit which supports the business cycle and a growing economy driven by business investments.

Lending standards data are categorized by bank type including foreign, large domestic and small domestic. In each of these categories, lending standards have eased over the last 9 months with foreign banks lending to U.S. firms having moderated their lending standards the most, followed by U.S. banks lending to large firms.

This information is worth carefully monitoring because of the importance of C&I loans in the current economic expansion. According to the FDIC most recent quarterly banking report, Commercial and Industrial (C&I) loans, along with Real Estate Construction and Development loans, have played a dominant role in sustaining and bolstering the economy, outpacing changes in Home Equity Loans and 1-4 Family Residential Real Estate Loans. 

This transformation in loan and lease composition is consistent with the growth phase of past economic cycles; however, the dominance of C&I loans suggests that the current lending environment looks more like that of 1998 than 2008.  This should be encouraging — but by no means a guarantee— to those who are concerned with a mass-correction event like that of the Great Recession.