On November 7, 2014, the US Office of the Comptroller of the Currency (“OCC”), the Federal Reserve Board, and the Federal Deposit Insurance Corporation (“FDIC”) released the annual Shared National Credits (“SNC”) review and a supplemental report on leveraged lending. The review found that the credit quality of large loan commitments owned by US banking organizations, FBOs, and nonbanks is generally unchanged in 2014 from the prior year. The supplemental report on leveraged lending highlighted deficiencies in underwriting standards and risk management of leveraged loans. Leveraged loans as reported by agent banks totaled $767 billion, or 22.6 percent of the 2014 SNC portfolio.

Federal banking regulations require institutions to engage in sound practices when involved in commercial lending activities, including leveraged lending. Regulators are looking to increase the frequency of leveraged lending reviews to ensure the level of risk is identified and managed.

The SNC Review is available at:

https://www.fdic.gov/news/news/press/2014/pr14096a.pdf,

the Leveraged Lending Supplement is available at:

https://www.fdic.gov/news/news/press/2014/pr14096b.pdf

and the Leverage Lending FAQ is available at:

https://www.fdic.gov/news/news/press/2014/pr14096FAQ.pdf.