However, Y-14 data contains detailed loan level information on loan terms and borrower characteristics

Bassett, William F., Mary Beth Chosak, John C. Driscoll, and Egon Zakrajsek. 2014. “Changes in Bank Lending Standards and the Macroeconomy.” Journal of Monetary Economics 62: 23–40.

Herkenhoff, Kyle. 2019. “The Impact of Consumer Credit Access on Unemployment.” The Review of Economic Studies, Volume, 86, Issue 6, 2019, pages 2605-2642

Lown, Cara, and Donald P. Morgan. 2006. “The Credit Cycle and the Business Cycle: New Findings Using the Loan Officer Opinion Survey.” Journal of Money, Credit Banking (Ohio State University Press) 38: 1575–1597.

Figure a1. Loadings Plot For Tightening Index

Note: This figure plots the loadings placed on the various questions about credit standards and loan terms when constructing the summary measure of changes in credit supply. The loadings for the first principal component are on the x-axis, and loadings for the second principal component are on the y-axis.

Figure a2. Net Change in Standards Compared to Tightening Index

Note: The left chart plots averages across banks within a quarter for the tightening index (black), the net change in standards (red) and the net change in various terms (grey), over time. The right chart plots a histogram of the reported changes in standards and the tightening index.

1. Andrew Castro, David Glancy, and Felicia Ionescu are in the Division of Monetary Affairs at the Federal Reserve Board of Governors. Greg Marchal is at Michigan State. This note reflects the views of the authors and should not be interpreted as reflecting the views of the Board of Governors of the Federal Reserve System. Return to text

2. The Senior Loan Officer Opinion Survey on Bank Lending Practices is a quarterly survey of banks which inquires about changes in supply or demand for various categories of loans. A typical survey has about 70 banks responding, accounting for about 70% of assets of domestically chartered institutions. The questions analyzed in this note date back to 1990, when the survey in its modern form began. Return to text

3. The Call Reports provide quarterly information on the balance sheets of the full universe of US banks and includes a wealth of information on banks’ loan portfolios. Y-14 is the data underlying the stress tests of the largest U.S. banks. It is available starting in 2011 and covers loan commitments over $1 million from banks with over $50 billion in consolidated assets ($100 billion starting in 2018). Return to text

4. Not all these questions were added at the same time. When analyzing Call Report data, we omit the net tightening variables pertaining to maximum maturity, risk premiums and interest rate floors so as to be able to construct the index back to 1990:Q1. When analyzing Y-14 data, which doesn’t begin until 2011, we use the full set of terms when constructing the supply index. Return to text

5. The loadings plot of the principal component index is shown in the Appendix Figure 1. The first principal component generally reflects how much terms tighten on net overall, while the second principal component generally reflects whether banks tighten on price vs. non-price dimensions. As we are interested in tightening supply overall, rather than differences in the effects of tightening across terms, we focus on the first principal component, which is very highly correlated with an unweighted average of the 9 net tightening variables. Return to text

6. These two departures are related. In the time series, the cross-bank average of the tightening index moves almost in lockstep with the net share of banks tightening standards. (See Appendix Figure 2.a for the time series for the tightening index and changes in standards and terms). The merit of using the full set of terms that banks report changing is more apparent for the cross-sectional analysis. Unlike the standards measure, which takes on three discrete values, the tightening index provides a more granular measure of changes in credit supply and gives a sense of the intensity of tightening. Namely, a bank that tightens terms across the board is likely tightening supply more, something not well captured by the standards measure. Appendix Figure 2.b plots a histogram of banks’ reported net change in standards and the tightening index, demonstrating that the tightening index provides much more variation. Return to text