Shared National Credit Review
By: Stephen Rountree
Annually, when the Shared National Credit Review is published by Federal Regulators, we compare the average & median loan classifications within the SHPCO client group to adverse classifications within the SNC program. The 2019 SNC review was published during January 2020. The definition of a SNC was amended during January 2018. Previously, SNCs had been any credit facility ≥ $20 million with three or more participants. To adjust for inflation and increases in average loan size, the minimum aggregate loan commitment threshold was increased from $20 million to $100 million effective January 1, 2018.
Classified assets totaled $204.1 billion at the 2019 review as compared to $182.5 billion in 2018 with special mention loans currently totaling $131.2 billion as compared to 2018’s $112.4 billion.
For reference, corresponding SHPCO client data is presented:
Highlights from the Shared National Credit Review:
- The 2019 SNC population totaled $4.83 trillion in commitments. Total commitments increased by $395 billion, or 8.9 percent, from the third quarter of 2018 to the third quarter of 2019. Growth was concentrated in investment grade equivalent transactions.
- The volume of SNC commitments with the lowest supervisory ratings (special mention and classified) rose slightly between 2018 and 2019. Total special mention and classified commitment levels remain elevated compared with lows reached during the previous periods of strong economic performance. A significant portion of special mention and classified commitments are concentrated in transactions that agent banks identified and reported as leveraged loans.
- The industries within the SNC portfolio with the highest classifications include Commodities (5.0%), Distribution (5.7%), and Services (7.1%).
- The credit risk associated with leveraged lending remains elevated. Leveraged loan commitments represent 83% of special mention commitments and 80% of classified commitments.