Federal Reserve Bank Advises Banks to Continue Strict Lending Practices

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In a supervisory letter delivered Tuesday to banks across the United States, the Federal Reserve Bank advised banks against the practice of easing up on their lending practices due to the inordinate number of weak loans in recent transactions.

The Fed commented that optimism on the part of banks, along with continued growth in the economy, contributed to this mindset. Loans also were in jeopardy by poor underwriting.

Even though the majority of loans were deemed in order by the Fed, in order to withstand the good as well as bad times in today's economy, banks were advised that they must implement sound loaning practices and screening processes.

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