Credit growth has slowed in recent months to some of its lowest levels in the past ten years, with banks reporting tighter credit standards and weaker loan demand from both businesses and consumers, according to the Federal Reserve’s Senior Loan Officer Opinion Survey. Securities, such as bonds held on banks’ balance sheets, experienced the largest decline, while loans and leases remained closer to their historical average. Nearly 51% of banks tightened terms of credit for commercial and industrial loans to medium and large businesses, with 49% tightening on loans to smaller businesses. Although standards remain below the 70%+ levels seen at the height of the pandemic, JP Morgan economist Daniel Silver indicated that “the degree of tightening in recent quarters looks pretty significant by broad historic standards” and while the data is “not a guarantee of a recession to come… the tightening evident as of late suggests that the economy should slow.” According to the Fed, the most cited drivers behind the stricter lending standards were “a less favorable or more uncertain economic outlook, an expected deterioration in collateral values, and an expected deterioration in credit quality of CRE (commercial real estate) and other loans.” Many banks also reported reserving for higher losses, and will be closely monitoring the market over the coming months.