According to the Federal Reserve, FDIC and OCC, underwriting and risk management practices continue to improve. The regulators said risk in the portfolio of large syndicated bank loans declined slightly but remains elevated, according to the recently released Shared National Credit (SNC) Program Review.
The high level of credit risk in the SNC portfolio stems primarily from distressed borrowers in the oil and gas (O&G) sector and other industry sector borrowers exhibiting excessive leverage. The review also found that credit risk management practices at most large agent banks continued to improve, consistent with the 2013 Interagency Guidance on Leveraged Lending.
The 2017 SNC portfolio included 11,350 credit facilities to 6,902 borrowers, totaling $4.3 trillion, up from $4.1 trillion in 2016. U.S. banks held the greatest volume of SNC commitments at 45.3% of the portfolio, followed by foreign banking organizations and non-bank entities. The review relied on the results of examinations conducted Q3/16 and Q1/17.
Loans were reviewed and stratified by the severity of their risk – special mention, substandard, doubtful, or loss – in order of increasing severity. Classified commitments include commitments rated substandard, doubtful and loss.
Other findings include:
The agencies conduct SNC reviews in the first and third calendar quarters with some banks receiving two examinations and others participating in a single review each year. The agencies provide results from the semiannual examinations in a combined report in order to present a complete view of the entire SNC portfolio comparable to prior years’ reports. The next report will be published following Q1/18 SNC examination.
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