WASHINGTON — Banking regulatory agencies Thursday announced that they would raise the aggregate loan commitment threshold for syndicated loans to be included in the Shared National Credit program from $20 million to $100 million.
In a statement, the Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. said the change was due in part to inflation and because most of the loans subject to SNC supervision are over $100 million. The threshold changes go into effect on Jan. 1.
The agencies said the change would release some 82 financial institutions from the SNC program while reducing the total aggregate value of loans identified as SNCs by only 2%.
“This change will reduce reporting burden for a substantial number of banking institutions, with no material impact on the size of the portfolio evaluated,” the agencies said. “As a result, the SNC program will continue to reflect a portfolio of more than $4.2 trillion in credit commitments.”
The release says that the total value of SNC loans before the change was $4.31 trillion, and after the change will be reduced to $4.218 trillion — a difference of nearly $100 billion. In addition to 82 banks no longer having SNC loans in portfolio, 1,573 borrowers will not have their loans counted as SNCs as well.
The agencies embarked on a joint semiannual examination schedule for banks with SNC loans in portfolio in 2016. The agencies said that, beginning next year, they will release the SNC annual results after the third-quarter examination rather than after the first-quarter examination.
The SNC program has been in place since 1977 and provides for “uniform treatment and increased efficiency in shared-credit risk analysis and classification,” according to the Federal Reserve website. The program is meant to ensure that large, risky syndicated loans — loans shared between several banks — perform according to uniform standards and are adequately capitalized.