Credit Risk in SNC Program Remains High, Agencies Find

The federal banking agencies found that credit risk improved modestly in 2021 but remains high in the Shared National Credit portfolio—a bundle of large, syndicated bank loans that includes 5,764 borrowers and totals $5.2 trillion—according to the SNC Review report released today.

The elevated risk was largely attributed to the effects of COVID-19, the agencies said; their report found that the direction of risk in 2022 will depend on continued successes in managing the pandemic. The report noted that other current concerns include inflation, supply chain imbalance, labor challenges, high debt levels and vulnerability to rising rates that could negatively affect the financial performance and repayment capacity of borrowers in a wide variety of industries.

The share of low-rated commitments in the SNC portfolio declined to 10.6% in 2021 from 12.4% in 2020. Total SNC commitments were up 2.1% year-on-year, while outstanding SNCs declined 8.4% to $2.4 trillion. U.S. banks held the greatest volume of SNC commitments at nearly 44.8% of the portfolio, followed by foreign banking organizations and nonbanks.