On November 5, 2015, the Board of Governors of the Federal Reserve System, the FDIC and OCC released results from the annual Shared National Credit review. The SNC review has been conducted by the banking agencies since 1977 to assess risk in the largest and most complex credits shared by numerous financial institutions. A SNC generally includes large loans or formal loan commitment extended to borrowers by a federally supervised institution, its subsidiaries and certain affiliates and is shared by three or more unaffiliated supervised institutions. According to the release, leveraged lending continues to be a key issue in the SNC portfolio. Specifically, the agencies noted that leveraged transactions originated over the past year continue to show structural deficiencies, an issue that has persistently been cited by US regulators as problematic, including the 2013 interagency guidance on leveraged lending. The release notes that there seems to be a discrepancy between industry practices and safe and sound banking expectations when looking at leveraged transaction structures. The review also pointed out weaknesses related to oil and gas credits.
The SNC Review and press release are available at: http://www.federalreserve.gov/newsevents/press/bcreg/20151105a.htm; and http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20151105a1.pdf.