The
federal bank and thrift regulatory agencies requested comment today on proposed
changes to the supervisory framework for the classification of commercial
credit exposures.
The
proposed guidance would replace the current commercial loan classification
system categories--“special mention,” “substandard,” and “doubtful”--with a
two-dimensional framework. The
two-dimensional rating system has one dimension that measures the risk of the
borrower defaulting (borrower rating) and a second focused on the loss severity
the institution would likely incur in the event of the borrower’s default
(facility rating). Facility ratings would be required
only for those borrowers rated default, typically a very small proportion of
all commercial exposures.
The proposed framework would increase consistency among the
agencies in assessing the credit risk in an institution's commercial loan portfolio. It also more closely aligns the
determination of a facility's accrual status with an institution's allowance
for loan and lease loss methodology and rating assessment process.
Comments on the proposed guidance
are requested by June 30, 2005. Specific
information on how to file a comment is contained in the Federal Register notice.
The interagency Federal Register
notice is attached.
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Attachments
Media Contacts:
FDIC David
Barr (202) 898-6992
Federal Reserve Andrew
Williams (202) 452-2955
OCC Kevin
Mukri (202) 874-5770
OTS Erin
Hickman (202) 906-6677