OCC Reports Tightening
of Retail Loan Underwriting

A survey of the 62 largest national banks in the U.S. by the Office of the Comptroller of the Currency (OCC) revealed a tightening of underwriting standards for the second consecutive year. The OCC's 2002 survey revealed that 39 percent of surveyed banks had tightened their retail lending guidelines, up from 32 percent a year earlier. Most affected were high loan-to-value home equity loans, consumer leasing and direct consumer loans. The responses regarding credit card portfolios were mixed. Some issuers eased their guidelines, although tightening outweighed easing on balance.

OCC examiners found that the three primary reasons for tightening were, in order of importance, the economic outlook, reduced risk appetite of the institution, and performance of the loan category. "Tightening" of standards translates into adjusting score card cut-offs for new accounts, as well as changes in pricing and collateral requirements. Examiners indicated that the tightening of retail lending standards at surveyed institutions was smaller than on the commercial side of the business.