US Agencies (OCC, FED, and FDIC) jointly released a report that presents the results of the 2018 reviews covering Shared National Credit (SNC) loans originated by or before March 31, 2018. The review finds improvement in credit quality and increased risks associated with leveraged lending. The agencies remind banks to update credit risk management practices as the risk profile of borrowers and the industry changes.
Federal banking agencies find that risk in the portfolio of large syndicated bank loans has declined, due to improving conditions in most sectors. Despite the improvement, the dollar volume of loans rated below "pass," as a percentage of total loans, remains elevated compared with levels experienced in prior economic cycles, according to the Shared National Credit (SNC) Program Review. The 2018 SNC portfolio included 8,571 credit facilities to 5,314 borrowers, totaling USD 4.4 trillion, up from USD 4.3 trillion in 2017. U.S. banks held the greatest volume of SNC commitments at 44.3% of the portfolio, followed by foreign banking organizations and other investor entities such as securitization pools, hedge funds, insurance companies, and pension funds. Effective January 01, 2018, the agencies increased the minimum aggregate loan commitment threshold to be included in the review from USD 20 million to USD 100 million. Under the revised definition, loan commitments increased modestly compared with levels reported in 2017. The number of borrowers and credit facilities, however, has declined.
The SNC Program is an interagency review and assessment of risk in the largest and most complex credits shared by multiple regulated financial institutions. SNC reviews are completed in the first and third quarters of the calendar year, with some banks receiving two reviews and others receiving a single review each year. The results discussed in this document are based on examinations conducted in the first and third quarters of 2018. Trends and exhibits shown in the report include data submitted by all reporting banks. Although some banks are examined twice a year, the agencies will continue to issue a single statement annually that captures combined findings from the previous 12 months. The next statement will be released on completion of the third quarter 2019 SNC examination.
Keywords: Americas, US, Banking, Credit Risk, SNC Loans, US Agencies
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.
ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.
ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.
EBA published the annual report on asset encumbrance of banks in EU.
MAS revised the guidelines that address technology and cyber risks of financial institutions, in an environment of growing use of cloud technologies, application programming interfaces, and rapid software development.
FED updated the reporting form and instructions for the FR Y-9C report on consolidated financial statements for holding companies.
EBA issued a consultation paper on the guidelines on monitoring of the threshold and other procedural aspects of the establishment of intermediate EU parent undertakings, or IPUs, as laid down in the Capital Requirements Directive.
EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.
BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.
HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.