Banks’ reluctance to lend could delay the impact of looser U.S. monetary policy, warns National Bank Financial in a research note.

“Since the housing bubble started to deflate and securitization activity slowed to a crawl, U.S. lenders have been turning more prudent. Lenders are renewing with the conservative lending practices of the old days (such as significant down payments requirements for mortgages and acceptable credit scores),” NBF observes.

It reports that, according to the latest quarterly Senior Loan Officers’ Survey from the U.S. Federal Reserve, the percentage of U.S. banks tightening standards for large and medium commercial and industrial loans has jumped from 32.2% in January to 55.4% in April. “More disturbing, the proportion of banks tightening C&I lending rates increased to an unprecedented 71.0% compared to 43.6% in January,” it notes. And, “In commercial real estate, 78.6% of U.S. banks said they tightened lending standards, the highest level since the index inception in 1990. For residential loans, about 62.3% of U.S. had tightened their lending standards on prime mortgages while 75.6% had done so for nontraditional residential mortgage loans.”

“Making it tougher for companies and consumers to borrow results in a bottom-up tightening, which partly counters the Fed’s easing campaign,” NBF cautions. “The risk at this point is that, if U.S. banks lending practices continue to offset Fed actions, the usual nine to 12 months monetary policy transmission lag could lengthen to 18-24 months. If so, the economic recovery could be delayed further down the road than what is currently expected by investors.”