Shared national credit balances rose 5% last year, and the percentage of at-risk loans nearly doubled. Regulators point out that banks have stashed away extra capital, but a lot will depend on the speed of the economic recovery and the performance of nonbank loans.
Win or lose, Citibank’s battle to recover half a billion dollars from an accidental payment is sure to prompt a review of internal controls in the industry and could have a lasting impact on the more than $1 trillion syndicated loan market.
By turning to investors outside traditional banking, private-equity firms are finding it easier than ever to get loans to finance their buyouts of corporations that are nowhere close to being profitable.
Amid widespread concern about their exposure to leveraged lending, the debt rating agency says banks have sufficient earnings and capital cushions to continue investing in the sector.
A recent joint analysis of large syndicated loans urged banks to improve their risk management, even though evidence suggests that nonbanks, not banks, hold the higher share of risky leveraged loans.
Despite a generally positive picture in the Shared National Credit report, regulators warned that underperforming loans in the the portfolio remain elevated.
U.S. financial institutions such as Bank of America, Citigroup, JPMorgan Chase and Goldman Sachs have reported hundreds of millions of dollars of losses stemming from the scandal at retailer Steinhoff International.
The London interbank offered rate will likely be replaced by a new reference rate that critics say is better suited for the derivatives market than it is for commercial lending.
Bank of America is offloading some margin loans after losing $292 million on soured credit to the former chairman of Steinhoff International Holdings, according to people with knowledge of the matter.