There are signs that the banking turmoil of recent months is coming home to roost.
The Bank of Canada Senior Loan Officer Survey showed significant tightening in some areas of lending, when it was released on Friday.
The failure of four U.S. regional banks since March has roused fears that lenders will pull back on issuing credit, adding another headway to economies already tipping towards recession.
The American version of the loan officer survey, also out last week, showed that the share of banks tightening terms on commercial and industrial loans rose to 46 per cent in the first quarter.
These are levels typically seen in recessions and banks in the poll cited lower risk tolerance, declining economic outlook and worsening industry problems as their reasons for tightening credit, reports Bloomberg.
“I am certainly getting vibes … in the market and in the business contacts that the credit crunch, or at least a credit squeeze, is beginning,” Chicago Fed President Austan Goolsbee told Yahoo! Finance last week.
Business lending is not nearly so restrictive here, the Bank of Canada survey showed, but is still the tightest since the start of the COVID-19 crisis. The net balance of 11 per cent of financial institutions reporting a tightening of lending standards to businesses was up from 4 per cent in the previous quarter.
Where Canadians are really feeling the pinch is consumer lending, especially mortgages.
More than 35 per cent of banks tightened household mortgage lending standards in the first quarter, a higher share than at the start of the pandemic and the most in the six-year history of the household lending survey.
“Unlike in the U.S., in Canada it appears to be households rather than businesses that are seeing the more widespread tightening of credit conditions,” said CIBC economist Andrew Grantham in a note on the data.