FDIC's Division of Risk Management Supervision published the Fall 2019 issue of Supervisory Insights. This issue features two articles, one on commercial real estate (CRE) loan concentration risk management and the other on leveraged lending. This issue also includes the Regulatory and Supervisory Roundup, which is an overview of the recently released regulations and other items of interest.
CRE Loan Concentration Risk Management—This article examines the CRE loan exposure in the banking industry as a whole. It presents the CRE loan risk management and governance trends observed at FDIC-supervised insured depository institutions with concentrations in CRE. These institutions represent over three-quarters of all insured depository institutions with concentrations in CRE and 61% of all assets of the insured depository institutions with concentrations in CRE. The article discusses broad supervisory findings and does not establish new requirements or new supervisory guidance. Rather, it provides insights into the current industry risk management practices and governance, based on the views of examiners.
Leveraged Lending: Evolution, Growth and Heightened Risk—This article provides an overview of the leveraged lending market and discusses the risks associated with leveraged lending. It includes observations regarding the current underwriting practices from examinations at state nonmember insured depository institutions and information from the Shared National Credit Program. The Shared National Credit Program is a primary mechanism for the Federal Regulatory Banking Agencies to monitor leveraged lending, for insured depository institutions, related to portfolio growth, underwriting trends, and risk management practices. Shared National Credit is defined as a loan greater than USD 100 million made by three or more institutions, which includes various types of loans, in addition to leveraged loans. The article notes that banks held approximately 63% of leveraged loan commitments in the Shared National Credit portfolio as of December 31, 2018, compared to 37% held by non-banks.
Related Link: Supervisory Insights
Keywords: Americas, US, Banking, Supervisory Insights, Commercial Real Estate, Concentration Risk, Leveraged Lending, Governance, FDIC
Previous ArticleCMF Proposes Standard on Information Security and Cyber Security
The European Commission (EC) published a report summarizing responses to the targeted consultation on the supervisory convergence and the single rulebook in the European Union (EU).
The Office of the Superintendent of Financial Institutions (OSFI) published an update on the discussion paper that intended to engage federally regulated financial institutions and other interested stakeholders in a dialog with OSFI, to proactively enhance and align assurance expectations over key regulatory returns.
The European Central Bank (ECB) published its opinion on a proposal for a regulation on European green bonds, following a request from the European Parliament.
The Advisory Scientific Committee (ASC) of the European Systemic Risk Board (ESRB) published a report that explores the expected impact of digitalization on provision of financial and banking services, and proposes policy measures to address the risks stemming from digitalization.
The European Banking Authority (EBA) announced that the guidelines on the reporting and disclosure of exposures subject to measures COVID-relief measures shall continue to apply until further notice.
The Swedish Financial Supervisory Authority (FI) announced that the capital adequacy reporting as at December 31, 2021 must be done by February 11, 2022.
The Central Bank of the Philippines (BSP) issued communications covering developments related to online lending platforms, open finance framework and roadmap, and on the expected regulations in the area sustainable finance.
The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.
The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).
The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0.