Syndicated Loan Losses Skyrocket

By Emily Flitter


The 2009 Shared National Credit Review released Thursday shows credit losses hit $53 billion, more than the combined losses identified in the preview eight reviews, which are conducted each year by federal banking regulators. The previous record for losses, set in 2002, was just a third of this year’s total. The shared credit review focuses on loans over $20 million that are shared by at least three lenders. “Classified” syndicated credits — ones rated by regulators to be “substandard,” “doubtful” or “loss” — nearly tripled to $447 billion, or 15.5% of the total loans reviewed, up from 5.8% last year.Non-banks held 47% of these troubled loans despite owning just over 20% of the $2.9 trillion total. Foreign bank organizations also held a larger portion, percentage-wise, of classified assets than their overall share of the portfolio. “The sharp difference between the risk characteristics of loans held by banks versus those held by non-banks is graphic — and costly — proof of the speculative corporate-credit market leading to the current crisis,” said Karen Shaw Petrou, the managing director of Federal Financial Analytics Inc. “Anyone could get credit from banks because banks knew they would have ready and willing buyers of syndicated loans even if red lights were blinking when the loans were booked.”