Bank loan standards stiffened
Following the 2008 financial crisis, the banking industry "had no choice but to tighten its credit policies and procedures," says David Nast, president and CEO of Progress Bank and Trust in Huntsville, Ala.
"The overall economic conditions that we all faced required us to raise our lending standards, which obviously created difficult situations for businesses and individuals who needed access to capital. Banks want to lend money, but the crisis made our jobs a little tougher in determining who we should lend money to," Nast says.
Today, Nast says most of the problems have been corrected, so banks are back in the business of lending capital -- with extra precautions. The biggest difference he experiences is the need to manage the interest rate environment from the perspectives of margin, or profitability, and interest rate risk.
"With rates so low on loans and deposits, it is difficult to maintain our profit margins," he says. "Also, low rates generally mean borrowers want a fixed rate on loans for as long as possible, so we have to be mindful of the risk associated with rising rates."
Nast expects the lessons of the financial crisis to linger with banks. "I don't think anyone could have predicted the severity of the crisis, but I know banking will be more cautious going forward," he says.