Tag: Credit Cycle

How Understanding Loan Demand and Credit Quality Will Make You A Better Banker

Managing Credit Volume

A common line of thinking in the banking industry, especially regulators, is that recessions are driven by, or at least exacerbated by, the supply of credit. Banks, in an effort to stay competitive, tend to drop their lending standards to hit their loan growth targets. In doing so, these banks take on more and more risk. This occurs until the credit cycle turns, and then banks run into credit problems. However, what happens if banks are watching the wrong competitors? While surely recessions are a function of credit supply, maybe recessions have more to do with demand?

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