Credit risk associated with large, syndicated bank loans as of June 30, 2024, remained moderate, banking regulators said Monday in their assessment of risk in the largest and most complex credit facilities shared by regulated banks and nonbanks, but they pointed to a “modest” increase in the severity of risk.
The agencies – the Federal Deposit Insurance Corp. (FDIC), Federal Reserve, and Office of the Comptroller of the Currency (OCC) – said this trend “reflects the continued pressure of higher interest rates, which have increased significantly since early 2022, and the impact of compressed operating margins in some industry sectors.”
The report released Monday is the 2024 Shared National Credit (SNC) Report. They said the review reflects the examination of SNC loans originated on or before June 30, 2024, focusing on leveraged loans and stressed borrowers from various industry sectors and assessed aggregate loan commitments of $100 million or more that are shared by multiple regulated financial institutions.
The report says the magnitude and direction of risk in 2025 will likely be affected by borrowers’ ability to manage interest expense, real estate conditions, and other macroeconomic factors. “These elements will continue to impact the financial performance and repayment capacity of borrowers in a wide variety of industries, especially highly leveraged borrowers that may lack the financial flexibility to respond to external challenges,” it states.
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