The US Treasury Secretary reported on the high probability of a change in the approach of local financial institutions to lending in the direction of tightening.

Source: motionarray.com

The Minister said that if this scenario of changing the policy of banks regarding the provision of credit funds is implemented, there will be a rollback of the Federal Reserve System’s campaign to increase interest rates.

Janet Yellen says that after the recent collapses in the banking system, it is highly likely that representatives of this industry will be more cautious when carrying out activities. She also noted that some changes in lending standards towards a tougher approach occurred even before the crisis and are likely to occur in the near future.

The minister says that tightening the credit policy of US financial institutions could potentially become an alternative to raising interest rates, which, according to her, is a necessity for the Fed. At the same time, Janet Yellen said that from the point of view of the prospects for further development of the industry, there are no dramatic or clear signs that the sphere is facing a depressive future.

The minister said that the situation with the outflow of deposits improved after the implementation of the decisions of the American government aimed at containing the threat of collapse of Silicon Valley Bank and Signature Bank.

Experts say that for small and medium-sized businesses, a potentially possible change in the approach of financial institutions to lending will become a problem that in some individual cases can provoke an economic catastrophe. Businesses have already faced difficulties in accessing credit funds.

Those representatives of small and medium-sized businesses whose activities are possible only in the case of credit support, when implementing the scenario of tightening the relevant policies of financial institutions, may be left with nothing at all.

Of the surveyed representatives of the small and medium-sized business sector on Main Street, more than 25% said that the prospects for their success directly depend on the working capital and loans issued by banks, since they cannot cope with the shortage of cash flows on their own. Another 18% of respondents pin their hopes for a bright future in conjunction with personal loans from financial institutions that are also at risk.

About 75% of businesses on Main Street said they could run out of cash at the beginning of the summer. Only one-quarter of small and medium-sized enterprises have access to financing sufficient to continue working for more than two months in a situation of money shortage.

As we have reported earlier, Bank of America Reshuffles Lending Unit Employees.