WASHINGTON — Some banks are starting to see a weaker demand for commercial and industrial loans and as a result are easing terms to pick up the pace.

The Federal Reserve Board's October 2006 Senior Loan Officer Opinion Survey on Bank Lending Practices culled findings from 54 domestic banks, which accounted for between 12% and 56% of all C&I loans on the books of domestic commercial banks as of June 30, 2006. Foreign respondents in the survey accounted between 10% and 48% of all C&I loans on the books of U.S. branches and agencies of foreign banks.

All domestic and foreign respondents that reported having eased their lending standards or terms in the October survey pointed to more aggressive competition from other banks or nonbank lenders as the most important reason for having done so. Notable net fractions of domestic institutions also cited increased liquidity in the secondary market for these loans, a more favorable or less uncertain economic outlook, and a reduction in defaults by borrowers in public debt markets as reasons for having eased credit standards or terms on C&I loans.