Academic journal article Federal Reserve Bulletin

Increase in Adversely Classified Syndicated Loans

Academic journal article Federal Reserve Bulletin

Increase in Adversely Classified Syndicated Loans

Article excerpt

Syndicated bank loans adversely classified by examiners increased in 2000 for the second consecutive year, according to data released on October 10, 2000, by three federal bank regulatory agencies.

The agencies--the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation--released aggregate data for the past six years and data by major industry sector for the past three years.

Under the Shared National Credit (SNC) Program, the agencies review large syndicated loans annually, usually in May and June. The program, established in 1977, is designed to provide an efficient and consistent review and classification of any loan or loan commitment shared by three or more supervised institutions and totaling $20 million or more.

In 2000, the SNC Program covered 9,848 credits to 5,844 borrowers totaling nearly $2 trillion in drawn and undrawn loan commitments. Of the total, $63 billion, or 3.3 percent, was classified adversely because of default or other significant credit concerns. That percentage is up from 2.0 percent in 1999 and 1.3 percent in 1998, the lowest level of the decade. Classified loans remain low relative to the peak of 10 percent of total commitments recorded in 1991.

Borrowers have drawn down about a third of the $1.95 trillion in loan commitments, or $701 billion. …

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