Shared National Credit Review Finds Risk Remains Elevated in Leveraged Loans

For release at 2:00 p.m. ET

WASHINGTON — Federal bank regulatory
agencies find that the share and amount of loan commitments with
the lowest supervisory ratings rose slightly between 2018 and
2019, according to the Shared National Credit (SNC) Program
Review. Total commitments with low ratings remain elevated
compared to lows reached during prior periods of strong economic
performance.

The report, which was released today by the Federal Reserve
Board, the Federal Deposit Insurance Corporation (FDIC), and the
Office of the Comptroller of the Currency (OCC), reflects
reviews primarily covering SNC loans originated on or before
June 30, 2019. It finds that credit risk associated with
leveraged lending remains elevated. Lenders have fewer
protections and risks have increased in leveraged loan terms
through the current long period of economic expansion since the
last recession. Most banks have adopted credit risk-management
practices to monitor and control this evolving risk. However,
some of these controls have not been tested in an economic
downturn. The agencies require banks to have risk-management
processes that can identify and adapt to changing market
conditions.

The 2019 SNC portfolio included 5,474 borrowers, totaling $4.8
trillion, up from $4.4 trillion in 2018. U.S. banks held the
greatest volume of SNC commitments at 44.4 percent of the
portfolio, followed by foreign banking organizations and other
investor entities such as securitization pools, hedge funds,
insurance companies, and pension funds. Total commitments
increased by $396 billion, or 8.9 percent, from third quarter of
2018 to the third quarter of 2019. Growth was concentrated in
investment grade equivalent transactions. The number of
borrowers and facilities increased modestly in 2019 after a
sizeable decline in 2018 associated with an increase in the
minimum commitment threshold to $100 million that was effective
January 1, 2018.

Loan commitments were reviewed and grouped into four categories
by the severity of their risk, from less severe to more severe:
special mention, substandard, doubtful, or loss. The last three
of which are known as “classified.” Overall, the level of loans
rated below “pass” as a percentage of the total SNC portfolio
increased slightly from 6.7 percent to 6.9 percent.
Bank-identified leveraged loan commitments represent 49 percent
of total SNC commitments. Leveraged lending was the primary
contributor to the overall special mention and classified rates.
Investors outside the banking industry held the greatest volume
of special mention and classified commitments, followed by U.S.
banks and foreign banking organizations.

The agencies conduct SNC reviews in the first and third calendar
quarters with some banks receiving two reviews and others
receiving a single review each year. The agencies issue a single
statement annually that includes combined findings from the
previous 12 months. This practice presents a complete view of
the entire SNC portfolio, which can be compared with prior
years’ reports. The next report will be published following the
third quarter 2020 SNC examination.

For additional information, see the attached SNC Program Review
Report.

Attachments:

Source URL: Read More
The public content above was dynamically discovered – by graded relevancy to this site’s keyword domain name. Such discovery was by systematic attempts to filter for “Creative Commons“ re-use licensing and/or by Press Release distributions. “Source URL” states the content’s owner and/or publisher. When possible, this site references the content above to generate its value-add, the dynamic sentimental analysis below, which allows us to research global sentiments across a multitude of topics related to this site’s specific keyword domain name. Additionally, when possible, this site references the content above to provide on-demand (multilingual) translations and/or to power its “Read Article to Me” feature, which reads the content aloud to visitors. Where applicable, this site also auto-generates a “References” section, which appends the content above by listing all mentioned links. Views expressed in the content above are solely those of the author(s). We do not endorse, offer to sell, promote, recommend, or, otherwise, make any statement about the content above. We reference the content above for your “reading” entertainment purposes only. Review “DMCA & Terms”, at the bottom of this site, for terms of your access and use as well as for applicable DMCA take-down request.

Acquire this Domain
You can acquire this site’s domain name! We have nurtured its online marketing value by systematically curating this site by the domain’s relevant keywords. Explore our content network – you can advertise on each or rent vs. buy the domain. Buy@TLDtraders.com | Skype: TLDtraders | +1 (475) BUY-NAME (289 – 6263). Thousands search by this site’s exact keyword domain name! Most are sent here because search engines often love the keyword. This domain can be your 24/7 lead generator! If you own it, you could capture a large amount of online traffic for your niche. Stop wasting money on ads. Instead, buy this domain to gain a long-term marketing asset. If you can’t afford to buy then you can rent the domain.

About Us
We are Internet Investors, Developers, and Franchisers – operating a content network of several thousand sites while federating 100+ eCommerce and SaaS startups. With our proprietary “inverted incubation” model, we leverage a portfolio of $100M in valued domains to impact online trends, traffic, and transactions. We use robotic process automation, machine learning, and other proprietary approaches to power our content network. Contact us to learn how we can help you with your online marketing and/or site maintenance.

Share