Banks are suppose to protect investor deposits

Bank are supposed to protect investor deposits, as another reason why they have historically had tighter lending practices, which continues to cause growth in the alternate financing market.

There has always been a gulf between the lending practices of Corporate banking and Retail Banking. The retail banking segment is internal to banks, know as branch banking. Branches have a dollar value tied to their portfolios and this is one reason branch managers and bankers have always been cautious about their lending practices. One bad large loan can make their past due in dollars skyrocket as a percentage of their branch's portfolio.

In general, retail banking has a longer chain of command, and everyone in the chain wants to protect their backside. The individual loan officer do not want to make bad loans, the branch mangers don't want to be responsible for bad loans in the portfolio, and district and region managers do not want to have their district or region have a high past due rate and have to report this to their Senior managers.

The same applies to the Corporate lending side of the bank. The difference is that on the Corporate lending side, the loan amounts are far greater, $10,000,000 or higher, versus much lower loan amounts in the retail banking side. Where the banks get into trouble is when a very large loan is made, $25,000,000 or higher. Since this a large amount, the most senior managers of the bank are often involved, and there is no one above them to review the loans or to provide scrutiny in the loans. This is a primary reason why bank loan portfolios often get into trouble.

Bank Lending Still Difficult

Gross sales loans for business, and equipment based types of Alternative financing continue to increase in popularity as obtaining business loans from banks continues to prove difficult.

Even consumer loans backed by Real Estate remain evasive as FHA loans still account for a very high percentage of home loans approved. With decline rates continuing to be up to 95% for business loan requests at major banking institutions, the dollar value of portfolios in alternative financing options will steadily increase.

In general, traditional banks have always been the most conservative of all lending institutions, and not much has changed. There are significant abberations to this, as evidenced by the housing market crash in 2008. Banks got caught up in the hot market of the previous decade and abandoned many of their conservative requirements.