The latest bank lending surveys by the Federal Reserve and the European Central Bank demonstrated that credit standards have tightened further, indicating that the credit crunch hasn't lost its bite, analysts say. Tighter lending standards have historically been a leading indicator of increasing high-yield default rates and lower new-loan growth rates, as well as for wider credit spreads. Unlike January when only a handful of banks surveyed indicated they had tightened because of weakened capital positions or concern about their own liquidity, this time around almost 35% of domestic banks and 45% of foreign institutions noted such concerns. The Bank of England says it is worried that UK banks have overstated their exposure to mortgage-linked investments and that this could delay an end to the credit crunch.
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