The Fed

No sign of a credit crunch: Banks lend more money and deposits rise, too

Bank loans stay close to record high

Banks have not cut back on lending to businesses.

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Banks increased lending last week and deposits rose for the first time in a month, showing little evidence of an emerging credit crunch in the U.S. banking system.

Total bank lending climbed by $10.4 billion to $12.13 trillion in the seven days ending May 17, the Federal Reserve reported Friday.

Most of the new loans originated with smaller banks that are supposed to be feeling more stress after the failure of several regional banks in the past few months.

Total bank deposits, meanwhile, rebounded by $30 billion last week to $17.5 trillion. Deposits had fallen earlier this month to the lowest level in almost two years.

All figures are taken from the Federal Reserve’s weekly H8 survey and are seasonally adjusted.

Key details: Commercial and industrial loans — a key economic driver — rose slightly to $2.76 trillion. These loans are still near a record high.

Big picture: The banking system is a key conduit for the U.S. economy, funneling money from depositors to individuals and businesses seeking loans.

Senior Fed officials are worried recent bank failures could cause lending to decline and hurt the economy. Some banking leaders, including Jamie Dimon at JPMorgan Chase JPM, +0.94%, also expect banks to lend less aggressively.

So far the evidence of a rapid pullback is thin, however. “It isn’t clear to me what the effect on the economy will be,” said Fed Gov. Christopher Waller this week.

Market reaction: Stocks DJIA, +1.00% SPX, +1.30% closed higher on Friday before the data were released. The yield on 10-year Treasury notes TMUBMUSD10Y, 3.756% slipped to 3.81%.

U.S. financial markets are closed Monday for Memorial Day.