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
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