February 24, 2023
Agencies issue 2022 Shared National Credit Program review
- Board of Governors of the Federal Reserve System
- Federal Deposit Insurance Corporation
- Office of the Comptroller of the Currency
For release at 12:00 p.m. EST
The federal bank regulatory agencies today reported in the 2022 Shared National Credit (SNC) report that credit quality associated with large syndicated bank loans improved in 2022, but noted the results do not fully reflect increasing interest rates and softening economic conditions that began to impact borrowers in the second half of 2022.
Overall, the report finds that credit risks for syndicated loans—large loans originated by multiple banks—were moderate at the end of the review period. While risks to borrowers impacted by COVID-19 have declined, they remain high for leveraged loans, as well as the entertainment, recreation, and transportation services industries.
The 2022 review, which evaluates the quality of large, syndicated loans, was conducted by the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, and reflects the examination of SNC loans originated on or before June 30, 2022. Consistent with the approach taken in 2021, it 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 2022 SNC portfolio included 6,214 borrowers, totaling $5.9 trillion in commitments, an increase of 13.9 percent from a year ago. The percentage of loans that deserve management's close attention (loans rated non-pass, including special mention and classified SNC commitments) decreased from 10.6 percent of total commitments to 7.0 percent year over year. Nearly half of total SNC commitments are leveraged loans, and commitments to borrowers in industries affected by COVID-19 represent about one-fifth of total SNC commitments. For leveraged borrowers that also operate in COVID-19 affected industries, non-pass loans decreased to 18.9 percent, but remain above the 13.5 percent observed in 2019. While U.S. banks hold nearly 45 percent of all SNC commitments, they hold only 21 percent of non-pass loans.