The recent failures of Silicon Valley Bank and Signature Bank have led to increased scrutiny of the banking sector. One consequence of all this is that financial institutions are likely to start getting pickier about who they lend to.
At the risk of stating (or even understating) the obvious, the world of banking and finance is dynamic right now. That’s a word Mark Hamrick, senior economic analyst at Bankrate.com, is using a lot these days — along with volatile and uncertain. And, he said that presents risks for consumers.
“That it’s going to be increasingly challenging for some borrowers to get access to credit,” Hamrick said. “And where they do get access to that credit, it’s going to be potentially more expensive.”
That’s because banks and other financial institutions are going to be looking for ways to manage their risk partly by holding onto more of their money “in an environment where the risks of a recession in the near term are seen to have risen,” Hamrick said.
People with good credit scores probably don’t have too much to worry about, said Josh Bivens, chief economist at the Economic Policy Institute.
“The people who will be crowded out by that kind of tightening of credit standards are people with more marginal credit scores, people who have had trouble with debt in the past, people with low or erratic incomes,” he said.
According to Bivens, this isn’t happening yet, but he thinks “bank lending standards are gonna get noticeably tighter in the next couple of weeks and months.”
That is, unless this whole dynamic situation resolves quickly and banks — with their consumers — feel more confident and stable again.