By Joshua Zumbrun
Bloomberg Business Week

Most banks in the U.S. expect loan delinquencies and charge-off rates to improve in 2011, a Federal Reserve survey showed, as standards eased and demand increased for business lending.

“Expectations were significantly more upbeat than in past years,” the central bank said today in its quarterly survey of senior loan officers. “Banks reported that they expected improvements in delinquency and charge-off rates during 2011 in every major loan category.”

An improvement in business lending may help push down an unemployment rate lingering near a 26-year high as companies borrow to expand and hire more workers. Fed policy makers led by Chairman Ben S. Bernanke last week reaffirmed plans to pump $600 billion into the financial system, saying economic growth has been “insufficient to bring about a significant improvement in labor market conditions.”

“We’re starting to see loan demand turn up, and that’s a very important indication that the financial system is healing and the commercial banking system is getting stronger,” said Michael Darda, chief economist and chief market strategist for MKM Partners in Stamford, Connecticut. “When that happens you usually see a step up in job creation as well.”

Banks continued to ease standards and terms for commercial and industrial loans in the fourth quarter, the survey also showed. By contrast, changes in terms for consumer loans were “small and mixed,” it said.

Treasuries Decline

Treasuries fell for the first time in three days after reports earlier today showed consumer spending rose more than forecast in December and businesses expanded in January at the fastest pace since July 1988.

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