What Is the Shared National Credit Program?

The Shared National Credit Program Explained

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The Shared National Credit Program is a system that reviews large syndicated loans every year. This review looks at aspects of loans such as credit risk and long-term trends.

Learn more about how the Shared National Credit Program was created and how it works.

Definition of the Shared National Credit Program

The Shared National Credit Program is a system that reviews the credit risk and management of large syndicated loans each year. It is intended to create a uniform system for evaluating and classifying these loans.

Syndicated loans involve a group of lenders who fund various parts of a loan for a single borrower.

The Shared National Credit Program was started in 1977 to create a centralized system for reviewing these types of loans. It was designed as a joint program between multiple agencies. The program is currently run by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency.

  • Acronym: SNC

Before the program was developed, parts of syndicated loans could be reviewed by different agencies. This led to the same loans being reviewed more than once, as well as reports that were not consistent. Because each agency used its own review system, the same loan could receive different classifications from different agencies.

The SNC created a single program to evaluate risk in the syndicated loan market. This way, all syndicated loans receive the same treatment. It is easier for borrowers to understand how the loans work and what their risks are.

Initially, the Shared National Credit Program was for loans of at least $20 million. In 2018, this increased to $100 million. This was due to inflation and changes in the average size of loans.

How the Shared National Credit Program Works

Under the Shared National Credit Program, a team of examiners reviews loans that are larger than $100 million and held by at least three supervised institutions. A supervised institution is any financial institution that’s overseen by a federal bank regulatory agency. These include FDIC-insured banks as well as their branches, subsidiaries, and affiliates. They also include federally licensed U.S. branches and agencies of foreign banks, state-licensed branches, and foreign bank agencies.

The reviews usually occur in the first and third quarters of the year. While some smaller banks get one review, other larger ones may opt for two. The results of each review are published by the Federal Reserve Board and reported after the third-quarter exam. Most reviews will include a summary of the results. They will also have information on leveraged lending and ownership of risk. The full report will also include details on trends in the industry.

The Shared National Credit Program also reviews large assets, such as real estate, stocks, notes, and bonds.

The loans that are reviewed are given a grade, which may be “pass,” “special mention,” or one of the classified ratings. This grade is applied to the loan across all the banks that are involved with it.

Findings of the 2020 Shared National Credit Program

The 2020 Shared National Credit Program found that credit risk for syndicated loans rose. Many banks, though, created stronger risk management systems. They were in a better position to lower the risks that come with large loans.

The 2020 review included 5,652 borrowers. The total value of the loans reviewed was $5.1 trillion. Almost half of this was considered leveraged loans. The percentage of “non-pass” loans, which included special mention and classified SNC commitments, increased from 6.9% to 12.4%. This was due to sectors that were affected by the COVID-19 pandemic, such as real estate, entertainment and recreation, oil and gas, and transportation.

Key Takeaways

  • The Shared National Credit Program is a review of large syndicated loans of at least $100 million in the United States. It also reviews large assets, such as real estate, stocks, notes, and bonds.
  • It was founded in 1977 and is maintained by multiple federal agencies.
  • The Shared National Credit Program gives each syndicated loan a grade, as well as looks at trends and how the institutions holding these loans manage risk.