Credit Quality Improves in 2010, Banking Agencies Say
Credit quality remained weak in 2010 but improved from the previous year, according to a recent study by the Federal Reserve and other federal banking agencies. The Shared National Credits (SNCs) Review for 2010 covers large loans and formal loan commitments that are shared by three or more supervised institutions.
According to the review, total loan commitments fell 12.6 percent to $2.5 trillion, and total SNC loans outstanding declined 22.5 percent to $1.2 trillion. Meanwhile, the volume of "criticized" loans decreased more than 30 percent, accounting for 18 percent of all SNCs, said the report. Criticized loans are those rated by banking agencies as having potential weaknesses or inadequate collateral as well as those that are unlikely to be collected in full or are deemed uncollectable.
Debt restructurings, better operating performance drive improvement
Refinancing risk, poor underwriting present problems
The federal banking agencies responsible for the review include the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision.
October 27, 2010