U.S. Tightens Purse Strings for Bank Loans to Europe

The Federal Reserve has observed that the U.S. banks have tightened their purse strings when it comes to bank loans to Europe. The quarterly survey by the Reserve covered data from 51 domestic banks and 22 U.S. branches of foreign banks. The uncertain economic situation in Europe has done little to help the case as almost two-thirds of the banks had tightened standards on bank loans to Europe.
The banks are effecting this tightening by putting a cap on size of bank loans, demanding higher down payments and charging higher interest rates. According to the Feds, majority of the banks had shown slight relaxation in lending bank loans to Europe in the earlier quarters but the quarter for July-September has been marked by tightened lending.
A new trend was observed in midsize and larger firms where an increase in reports of weaker demands for bank loans has been observed. The weak economy has reduced the demand for bank loans with several small banks ready to give loans but unable to generate demand.