Major lenders tightening credit lines for big firms amid crisis

JPMorgan Chase & Co, Citigroup Inc and Bank of America Corp are among lenders cutting back on $1.6 trillion of credit lines as they face increased demand for loans that threaten to drain capital.

Banks used loan negotiations with retailers Rite Aid Corp and Ethan Allen Interiors Inc, and with homebuilder Ryland Group Inc in the past month to reduce credit limits and raise interest rates. After more than $1 trillion of writedowns and credit losses, lenders are moving to lessen the chance that troubled companies will withdraw funds.

While President Barack Obama demands they extend more credit, banks are reluctant to do so until they know how much they'll need to back with more funds, according to a Jan 23 Citigroup research report. Companies may need to issue $450 billion of bonds to replace loans that won't be renewed when they mature in the US and Europe this year, the bank said.