SNC review - leveraged loan risk remains elevated

The federal bank regulatory agencies (Fed, FDIC, and OCC) have released the results of their Shared National Credit (SNC) program review. The report reflects reviews primarily covering SNC loans originated on or before June 30, 2019. It finds that credit risk associated with leveraged lending remains elevated. Lenders have fewer protections and risks have increased in leveraged loan terms through the current long period of economic expansion since the last recession. Most banks have adopted credit risk-management practices to monitor and control this evolving risk. However, some of these controls have not been tested in an economic downturn. The agencies require banks to have risk-management processes that can identify and adapt to changing market conditions.