Bank Credit Conditions at 2008 Levels

Apollo Chief Economist

The Fed’s Senior Loan Officer Survey for Q2 was done in April after SVB but before First Republic Bank, and it shows an ongoing tightening in credit conditions across all types of lending.

Specifically, the survey asks banks if they have tightened lending standards for firms and households relative to last quarter, and across all indicators for demand for loans and supply of loans, we are now at or close to 2008 levels, see charts below.

In addition, the first sentence in the notes to the Fed’s Senior Loan Officer Survey shows that it only covers large banks out of the roughly 4,000 banks in the US, so credit conditions in small and medium-sized banks are likely tightening even more than seen in the charts below.

The bottom line for markets is that with inflation still at 5%, well above the FOMC’s 2% inflation target, and the Fed not cutting rates anytime soon, credit conditions will continue to tighten, and as a result, a recession is coming that could be deeper or longer than the consensus currently expects.

Source: FRB, Bloomberg, Apollo Chief Economist
Source: FRB, Bloomberg, Apollo Chief Economist
Source: FRB, Bloomberg, Apollo Chief Economist
Source: FRB, Bloomberg, Apollo Chief Economist
Source: New York Fed Consumer Credit Panel / Equifax, Apollo Chief Economist
Source: University of Michigan, Haver Analytics, Apollo Chief Economist

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