US Agencies Review Credit Risk at National Level
The Board of Governors of the Federal Reserve System (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) jointly published the 2021 Shared National Credit (SNC) Review Report. The SNC Program assesses risk in the largest and most complex credits in the country. The 2021 report reflects reviews conducted in the first and third quarters of 2021 and primarily covers loan commitments originated on or before June 30, 2021.
The 2021 SNC portfolio included 5,764 borrowers, totaling $5.2 trillion in commitments, an increase of 2.1% from a year ago. The 2021 SNC Review focused on borrowers in five industries that were affected significantly by the pandemic: entertainment and recreation, oil and gas, commercial real estate, retail, and transportation services. The results show that SNC credit risk for large syndicated loans improved modestly in 2021 but remains high largely due to the impact of COVID-19. SNC commitments with the lowest supervisory ratings (special mention and classified) have decreased from 12.4% in 2020 to 10.6% in 2021. Nearly half of total SNC commitments are leveraged loans and commitments to borrowers in COVID-19 affected industries represent about one-fifth of total SNC commitments. The report notes that credit risk associated with leveraged lending is high and leveraged loans comprise half of total SNC commitments but represent a disproportionately high level of the total special mention and classified exposures. The review cautions that portfolio management and stress testing processes should consider that loss and recovery rates may differ from historical levels and risks identified in stress tests should be measured against their potential impact on capital and earnings. Moreover, the review results highlight that direction of risk in 2022 will be impacted due to management of COVID-19 pandemic and other concerns such as inflation, supply chain imbalance, labor challenges, and high debt levels while vulnerability to rising rates could negatively impact the financial performance and repayment capacity of borrowers in a wide variety of industries.
Related Links
Keywords: Americas, US, Banking, Covid-19, Credit Risk, SNC Loans, US Agencies, Lending, Portfolio Management, Stress Testing, Leveraged Lending
Featured Experts

Laurent Birade
Advises U.S. and Canadian financial institutions on risk and finance integration, CCAR/DFAST stress testing, IFRS9 and CECL credit loss reserving, and credit risk practices.

James Partridge
Credit analytics expert helping clients understand, develop, and implement credit models for origination, monitoring, and regulatory reporting.

Cristian deRitis
Leading economist; recognized authority and commentator on personal finance and credit, U.S. housing, economic trends and policy implications; innovator in econometric and credit modeling techniques.
Previous Article
FFIEC Issues Guidance on Authentication and Access Risk ManagementRelated Articles
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.
FCA Sets up ESG Committee, Imposes Penalties, and Issues Other Updates
The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.
FSB Reports Assess NBFI Sector and Progress on LIBOR Transition
The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.