U.S. regulators say that due to poor underwriting standards and the continuing weakness in economic conditions, in 2009 the level of losses from syndicated loans facing banks and other financial institutions tripled to $53 billion.

Shared National Credit Program (SNC) 2009 Review

According to the Shared National Credit Program (SNC) 2009 Review, which is an annual inter-agency report that has been released on Thursday, credit quality with respect to large loans and loan commitments deteriorated to record levels.

By whom this reviews is prepared?

The Federal Reserve Board of Governors, Federal Deposit Insurance Corp (FDIC), Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) prepare the SNC review.

SNC Review has been set up to review large syndicated loans

The Shared National Credit Program which has been set up in 1977 in order to review large syndicated loans now reviews and classifies all institutional loans of at least $20 million and all these loans are shared by three or more supervised institutions.

SNC portfolio

According to the report, criticized assets rated ‘special mention’, ‘substandard’, ‘doubtful’ and ‘loss’, touched $642 billion, by which 22.3 % of the SNC portfolio is represented, compared with 13.4 % a year ago.

Classified assets rated ‘substandard’, ‘doubtful’, and ‘loss,’ has shown a rise up to $447 billion from $163 billion in 2008.

Non-accrual loans

In 2009 the volume of SNCs rated ‘doubtful’ and ‘loss’ rose almost 14-fold to $110 billion, while non-accrual loans reached up to $172 billion, which has raised up from $22 billion in 2008.

Loans held by Foreign banks

It has also been said by the report that foreign banks held about 38 % of the $2.9 trillion in loans, while 21 % has been held by hedge funds, pension funds, insurance companies and other entities.

It has also been elaborated by the report that non-banks continued to hold a “disproportionate share” of classified assets compared with their total share of the SNC portfolio. They hold 47 % of loans that are considered as ‘substandard’, ‘doubtful’ and ‘loss’.

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