The 2019 SNC Review Results: Increased Criticized Loans Observed

Kramer Levin Naftalis & Frankel LLP

On Jan. 31, 2020, the board of governors of the Federal Reserve System (the Federal Reserve), the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC, and together with the Federal Reserve and the FDIC, the regulators) released the results of the first- and third-quarter 2019 Shared National Credit (SNC) Program Reviews, the process by which the regulators assess credit risk and trends as well as risk management practices with respect to the largest and most complex credits shared by multiple regulated banks.

SNC reviews began in 1977 and review credits with a minimum amount of $100 million shared by two or more regulated banks. They are completed in the first and third quarters of the calendar year. Large agent banks receive two reviews each year, while most other agent banks receive one review each year.

The highlights of the 2019 SNC Program Review include findings by the regulators that although the total commitments increased by $396 billion, the total commitments’ distribution among U.S. banks, foreign bank organizations and nonbank entities remains steadily identical. The regulators noted that the level of loans in the SNC portfolio with the lowest supervisory ratings (special mention and classified) increased by 13.7 percent and represents 6.9 percent of total commitments. The regulators also noted that nonbank entities have further increased their participation in the leveraged lending market, holding 64.9 percent of all special mention and classified loans and commitments. Special mention and classified loans and commitments represented 20.4 percent of the total commitments of nonbank entities.

The press release issued by the regulators relating to the 2019 SNC Program Review can be found here. The full report can be found here.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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