Banks are gradually raising the cost of business loans

Today, 46% of the banks consulted by the Fed have raised the cost of financing for commercial and industrial loans (C&I) to mid-to-large businesses as of the first quarter this year, which is a slight increase from 45% in the survey from the previous quarter. C&I loans are important for helping businesses expand their operations and finance new equipment among other things.

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The monetary policy committee at the Fed had access to the results of this survey before they made their decision to hike by 25 basis points, so the new data is unlikely to impact whether the Fed pauses or hikes again in June.

Not only are the Fed’s interest rate hikes raising the cost of capital for banks, but the recent spate of regional bank failures—Silicon Valley Bank, Signature Bank, and First Republic Bank—has also rattled public bank stocks and made lenders more skittish as they fret about potential deposit flight. This is the first Fed survey of bank lending to be released since these banks failed.

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“Although banks of all sizes cited the same reasons for tightening, mid-sized and other banks more frequently cited the bank’s liquidity position,” the Fed wrote in its SLOOS report.

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