Board of Governors of the Federal Reserve System

Federal bank regulatory agencies today released the 2021 Shared National Credit (SNC) Review Report. According to the two SNC examinations conducted last year, credit risk for large syndicated loans improved modestly in 2021, but remains high. The elevated risk is largely attributed to the effects of COVID-19. A recovery in commodity prices has led to significant improvement in the loans to the oil and gas sector that is partially offset by year over year weakening in commercial real estate (CRE), particularly in the hotel, office, and retail sub-sectors.

The 2021 SNC Review, which evaluates the quality of large syndicated loans, was conducted by the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, and reflects the examination of SNC loans originated on or before June 30, 2021. The 2021 SNC Review, consistent with the approach taken in 2020, focused on borrowers in five industries that were affected significantly by the pandemic: entertainment and recreation, oil and gas, CRE, retail, and transportation services.

The 2021 SNC portfolio included 5,764 borrowers, totaling $5.2 trillion in commitments, an increase of 2.1 percent from a year ago. The percentage of non-pass loans, including special mention and classified SNC commitments, decreased from 12.4 percent to 10.6 percent year over year. Nearly half of total SNC commitments are leveraged loans, and commitments to borrowers in COVID-19 affected industries represent about one-fifth of total SNC commitments. For leveraged borrowers that also operate in COVID-19 affected industries, non-pass loans decreased slightly to 25.7 percent, but remain well above the 13.5 percent observed in 2019. While U.S. banks hold nearly 45 percent of all SNC commitments, they hold only 25 percent of non-pass loans.