FDIC Issues Guidance on Managing Oil and Gas Loan Risks

With the path of oil prices uncertain but not forecast to improve substantially in the coming months, the FDIC today issued guidance reiterating principles for prudently managing risks associated with oil and gas exposures. The agency said it expects banks to monitor their direct and indirect exposures to oil and gas, as well as manage any concentration risks related to oil and gas.

In addition to monitoring direct lending concentrations, the FDIC also urged bankers to track their indirect exposures to oil and gas volatility, including borrowers that could be affected by economic growth or contraction related to the oil market. The guidance also reminded bankers to “report the results of concentration monitoring programs regularly to the board of directors.”

The agency reiterated previous guidance on constructive and well-conceived workout plans for borrowers affected by adverse conditions in the oil and gas market in order to strengthen the credits and mitigate losses where possible. The OCC recently updated its Comptroller’s Handbook on oil and gas lending, and the Federal Reserve is expected to issue its own guidance soon. ABA issued a staff analysis of the OCC guidance. For more information, contact ABA’s Barry Mills.