The Fed's quarterly Senior Loan Officers Opinion Survey showed that in general bank lending standards had eased in first three months of the year, a sign that financial institutions are willing to take greater risks to expand credit.
"Some banks that had eased standards and terms ... pointed to a more favorable or less uncertain economic outlook," the Fed said.
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While demand for commercial loans increased from large and middle-sized firms, gains in credit demand from smaller firms were more modest, the Fed said.
Analysts had been hoping to see a pickup in demand among small firms, which tend to create more jobs than big firms and whose demand for bank credit is more indicative of business health because larger firms are able to get funding from a range of sources.
(Reporting by Mark Felsenthal; Editing by Neil Stempleman)