Lenders in the drought-stricken parts of the Farm Belt will get some compassion from bank examiners, according to the Federal Deposit Insurance Corp.

In an Aug. 9 letter, the agency advised bankers that examiners would be "objective, realistic, and fair in their assessment of agricultural credits."

Nicholas Ketcha Jr., FDIC director of supervision, said examiners must "recognize when an institution is taking reasonable steps to deal with external risk factors ... such as weather conditions or commodity prices."

Even if loans are classified, examiners have been instructed not to require banks to foreclose on collateral. "Such a decision is, properly, the prerogative of bank management," Mr. Ketcha's letter concluded.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.