On September 5, 2018, the FDIC released their summer edition of their Supervisory Insights publication. The notice of the publication, FIL-44-2018, explained that the current edition features two main articles of interest to examiners, bankers and supervisors.
The first article addresses the business of bank lending to the oil and gas sector. This article gives an overview the unique business of lending to the oil and gas sector. The FDIC explains that “the steep drop in oil prices beginning in 2014 tested the risk-management practices of insured banks active in O&G lending and other banks operating in geographic areas that depend on the O&G industry.” In the article, the FDIC shares observations from its monitoring efforts and supervisory activities related to institutions affected by the O&G industry.
The second article provides an overview of bank credit risk grading systems. The information and analysis presented in this article come from examiner observations about the loan risk-rating systems at selected large FDIC banks. The article provides examples of how strong credit grading systems incorporate clearly identifiable processes and establish a sound governance framework.
The issue concludes with a “regulatory and supervisory roundup” which is an overview of recently released regulations and other items financial institutions should be aware of.
The full edition of the Summer 2018 edition of the FDIC’s Supervisory Insights can be found here.