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Banks lowering standards
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September 17, 1998: 1:40 a.m. ET
Risk of bad debts grows as banks take on riskier loans, government report finds
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NEW YORK (CNNfn) - The nation's commercial banks are lowering the standards they apply to business loans, raising the risk of increased bad-debt problems in the next year to 18 months, the Washington Post reported Thursday, citing a government report.
The Office of the Comptroller of the Currency, a federal agency that regulates national banks, found the lowered standards for a fourth consecutive year after surveying 77 major banks in April, May and June.
The eased standards mean that the banks are making loans to borrowers that might not have qualified so easily in the past, the Post reported. The change primarily affects commercial loans, although some consumer credit standards -- particularly home equity lending -- also have been eased.
The risk is that the banks' financial health could be put at risk if less-worthy borrowers default on loans, particularly if the nation falls into recession.
Lenders already have been affected by the economic crises afflicting national economies around the world, although they could recoup their positions quickly if global markets rebound.
"Projecting risk over the next 12 months, credit risk is expected to further increase in all commercial portfolios," the Office of the Comptroller of the Currency said in its report, which was obtained by The Washington Post. "Banks are leaving themselves with fewer options to control the risks associated with commercial lending should the economy falter."
The Office of the Comptroller of the Currency was scheduled to announce the results of the survey on Thursday, the Post said. 
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