The federal financial regulatory agencies and the state supervisors issued this statement to restate and elaborate their supervisory views on prudent lending to creditworthy small business borrowers. The statement builds on the principles in existing guidance for prudent lending to creditworthy borrowers and strives to ensure that supervisory policies and actions do not inadvertently curtail the availability of credit to sound small business borrowers. Further, while the regulators expect institutions to effectively monitor and manage credit concentrations, institutions should not automatically refuse credit to sound borrowers because of a borrower's particular industry or geographic location. Financial institutions that engage in prudent small business lending after performing a comprehensive review of a borrower's financial condition will not be subject to criticism.
The financial regulators recognize that prudent commercial real estate (CRE) loan workouts are often in the best interest of financial institutions and creditworthy CRE borrowers. This guidance focuses on the elements of prudent workout programs. It also provides illustrations of the analytical review process to ensure the credit risk in a loan workout is accurately identified and the arrangements receive appropriate regulatory reporting and accounting treatment. While the Workout Guidance focuses on CRE loans, its concepts and illustrations also are applicable when working with small business borrowers.
The federal financial regulatory agencies issued these Interagency Appraisal and Evaluation Guidelines to update and replace existing supervisory guidance to reflect changes in appraisal and evaluation practices. The Guidelines build on longstanding, prudent standards for valuing real property. The Guidelines clarify that an analytical method or technological tool, such as an automated valuation model, cannot be substituted for an appraisal when the transaction requires an appraisal. Further, the Guidelines enhance the requirements for collateral valuation methods for transactions that permit the use of an evaluation rather than requiring a new appraisal.