Shared National Credit Program

The Board of Governors of the U.S. Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) formed the shared national credit program in 1977 to provide an efficient and consistent review and classification of large syndicated loans.

A syndicated loan is a loan that a group of lenders, working in tandem, provides for a single borrower.

The shared national credit program not only assesses credit risk but also associated trends in risk management practices among the largest and most complex shared loans. According to the Board of Governors of the Federal Reserve System, “the program provides for uniform treatment and increased efficiency in shared-credit risk analysis and classification.”

The agencies which govern the program initiated a semiannual SNC examination schedule in 2016. SNC reviews are now planned for the first and third calendar quarters although some banks will receive two examinations and others simply one.

On January 1, 2018, the agencies announced that the aggregate loan commitment threshold had increased to $100 million, up from $20 million previously. The purpose of the change was to reduce banks' reporting burden.

The main goal of syndicated lending is to spread the risk of a borrower default across multiple lenders. These lenders can be banks or institutional investors (high net worth individuals, pension funds, and hedge funds). Because syndicated loans tend to be much larger than standard bank loans, the risk of even one borrower defaulting could cripple a single lender.

To break down syndicated loans even further, these structures are also common in the leveraged buyout community. A leveraged buyout is the acquisition of another company, using a significant amount of debt to meet the initial cost of acquisition. The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company. The goal of a leveraged buyout is to allow companies to make large acquisitions without committing a great deal of capital.

In August 2017 the Board of Governors of the Federal Reserve System, FDIC, and OCC released a press release saying that the “Shared National Credit review finds risk remains high, but underwriting and risk management continue to improve.” The press release further detailed how risk in the portfolio of large syndicated bank loans declined slightly but remains elevated, primarily due to distressed borrowers in the oil and gas (O&G) sector, along with additional borrowers in the industry sector exhibiting excessive leverage.