Risk Management Manual of Examination Policies - FDIC

LOANS Section 3.2
Overview of the Shared National Credit
(SNC) Program
The Shared National Credit (SNC) Program is an
interagency initiative administered jointly by the FDIC,
Federal Reserve Board, and the Office of the Comptroller
of the Currency. The program was established in the
1970's for the purpose of ensuring consistency among the
three Federal banking regulators in the classification of
large syndicated credits.
Each SNC is reviewed annually at its agent bank or a
designated review bank and the quality rating assigned by
examiners is reported to all participating banks. These
ratings are subsequently used during all examinations of
participating banks, thus avoiding duplicate reviews of the
same loan and ensuring consistent treatment with regard to
regulatory credit ratings. Examiners should not change
SNC ratings during risk management examinations. Any
material change in a SNC should be reported to the
appropriate regional SNC coordinator so that a
determination can be made as to the appropriate action,
including inclusion in the credit re-review process.
Definition of a SNC
Any loan and/or formal loan commitment, including any
asset such as other real estate, stocks, notes, bonds and
debentures taken for debts previously contracted, extended
to a borrower by a supervised institution, its subsidiaries,
and affiliates which in original amount aggregates $20
million or more and, which is shared by three or more
unaffiliated institutions under a formal lending agreement;
or, a portion of which is sold to two or more unaffiliated
institutions, with the purchasing institution(s) assuming its
pro rata share of the credit risk.
SNC's Include:
• All international credits to borrowers in the private
sector, regardless of currency denomination, which are
administered by a domestic office.
• Assets taken for debts previously contracted such as
other real estate, stocks, notes, bonds, and debentures.
• Credits or credit commitments which have been
reduced to less than $20 million and were classified or
criticized during the previous SNC review, provided
they have not been reduced below $10 million.
• Any other large credit(s) designated by the supervisory
agencies as meeting the general intent or purpose of
the SNC program.
• Two or more credits to the same borrower that
aggregate $20 million and each credit has the same
participating lenders
SNCs Do Not Include:
• Credits shared solely between affiliated supervised
institutions.
• Private sector credits that are 100 percent guaranteed
by a sovereign entity.
• International credits or commitments administered in a
foreign office.
• Direct credits to sovereign borrowers.
• Credits known as "club credits", which include related
borrowings but are not extended under the same
lending agreement.
• Credits with different maturity dates for different
lenders.
For additional information regarding the SNC Program
examiners can contact the regional SNC coordinator.
Glossary of Syndicated Lending Terms
Agent – Entity that assumes the lead role in originating and
administering the credit facility.
Arranging Banks – The banks that arrange a financing on
behalf of a corporate borrower. Usually the banks commit
to underwriting the whole amount only if they are unable to
place the deal fully. Typically, however, they place the
bulk of the facility and retain a portion on their books. For
their efforts in arranging a deal, these banks collect an
arrangement fee.
Front-end costs – Commissions, fees or other payments
that are taken at the outset of a loan. Some examples are:
lead management fees – paid in recognition of the lead
manager’s organization; management fees – usually
divided equally between the management group and is
payable regardless of drawdown; underwriting fees – a
percentage of the sum being underwritten; participation
fees – expressed as a percentage of each bank’s
participation in the loan; and agency fees – levied on most
loans and provide for the appointment of one or more agent
banks. The fee may be a percentage of the whole facility
or a pre-arranged fixed sum.
LIBOR – London Interbank Offered Rate – The interest
rate at which major international banks in London lend to
each other and the rate(s) frequently underlying loan
interest calculations. LIBOR will vary according to market
conditions and will of course depend upon the loan period
as well as the currency in question.
Participating Banks – a bank that has lent a portion of the
outstanding amount to the borrower.
DSC Risk Management Manual of Examination Policies 3.2-63 Loans (12-04)
Federal Deposit Insurance Corporation