The Q1 2025 Senior Bank Loan Officers’ Survey (SLOS) revealed that most banks kept their credit standards for both business and consumer loans steady, based on the modal approach. However, the diffusion index (DI) method suggested a net tightening in credit standards for both sectors.
Changes in Credit Standards
Business Loans
According to the modal approach, 81.8% of respondent banks maintained their credit standards for enterprises in Q1 2025, a slight decline from 83.3% in the previous quarter. Meanwhile, the DI method showed fewer banks reporting tighter credit standards this quarter, suggesting a moderation in tightening.
The main drivers for stricter standards were a perceived deterioration in borrower profiles and declining profitability in banks’ loan portfolios.
Looking ahead to Q2 2025, 85.5% of banks expect to keep lending standards for businesses unchanged, according to modal results. Similarly, DI findings indicate a neutral outlook, with expectations of steady standards due to a stable economic environment and unchanged borrower risk profiles.
Household Loans
The modal approach showed that 86.8% of banks retained their lending standards for households in Q1 2025, down from 89.5% in Q4 2024. In contrast, the DI method indicated a net tightening in consumer loan standards, reversing the neutral stance seen in the previous quarter.
This tightening was primarily attributed to a decline in borrowers’ credit quality, reduced risk appetite, and weakening portfolio profitability.
For Q2 2025, 82.1% of banks surveyed via the modal method expect household credit standards to remain steady. However, DI results suggest a continuing net tightening, with banks anticipating further deterioration in borrower profiles and portfolio profitability.
Changes in Loan Demand
Business Loans
The modal approach found that 67.3% of banks reported unchanged demand for enterprise loans in Q1 2025, down from 74.1% in the previous quarter. However, the DI results indicated a net increase in demand for business loans, driven by greater financing needs for inventories and improved economic sentiment among clients.
Looking to the next quarter, 61.8% of banks expect steady demand, based on the modal method. DI findings point to a continued net rise in loan demand, supported by stronger inventory financing needs, more optimistic business outlooks, and greater short-term financing requirements.
Household Loans
Based on modal results, 71.8% of banks reported unchanged consumer loan demand in Q1 2025, compared to 73.7% in Q4 2024. On the other hand, DI data signaled a net increase in household loan demand, attributed to more favorable lending terms and rising consumer spending.
For Q2 2025, 66.7% of banks expect demand for household credit to remain unchanged, according to the modal method. Meanwhile, DI results suggest a net increase in expected demand, driven by continued consumption growth and banks’ more attractive financing conditions.
