Highlights:
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Some small business borrowers are experiencing difficulty in obtaining or renewing credit to support their operations.
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Although loans outstanding to small businesses and farms increased at institutions with total assets of less than $1 billion for the year ending June 30, 2009, this category of lending declined by almost $14 billion overall, with the decrease primarily occurring at banks with total assets over $100 billion.
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This decline is attributable to a number of factors, including general trends in the economy, decreasing loan demand, and the emergence of credit problems.
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Institutions' analyses of borrowers' cash flow should reflect expectations for the borrowers' performance over a reasonable range of future conditions, rather than overly optimistic or pessimistic cases.
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Institutions should not use portfolio management models that rely primarily on general inputs, such as geographic location and industry, as a substitute for the evaluation of an individual customer's repayment capacity.
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Examiners will take a balanced approach in assessing the adequacy of an institution's risk management practices and small business lending activities.
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Examiners will not adversely classify loans solely due to a decline in the collateral value below the loan balance, provided the borrower has the willingness and ability to repay the loan according to reasonable terms.
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This statement supplements existing guidance.
Distribution:
FDIC-Supervised Banks (Commercial and Savings)
Suggested Routing:
Chief Executive Officer
Chief Lending Officer
Related Topics:
Policy Statement on Prudent Commercial Real Estate Loan Workouts (FIL-61-2009)
Managing CRE Concentrations in a Challenging Environment (FIL-22-2008)
Interagency Statement on Meeting the Needs of Creditworthy Borrowers (FIL-128-2008)
Guidance on Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices (FIL-104-2006)
Attachment:
Interagency Statement on Meeting the Credit Needs of Creditworthy Small Business Borrowers - PDF (PDF Help)
Contact:
Beverlea S. Gardner, Senior Examination Specialist, at BGardner@FDIC.gov or (202) 898 3640
Printable Format:
FIL-5-2010 - PDF (PDF Help)
Note:
FDIC financial institution letters (FILs) may be accessed from the FDIC's Web site at www.fdic.gov/news/news/financial/2010/index.html.
To receive FILs electronically, please visit http://www.fdic.gov/about/subscriptions/fil.html.
Paper copies of FDIC financial institution letters may be obtained through the FDIC's Public Information Center, 3501 Fairfax Drive, E-1002, Arlington, VA 22226 (1-877-275-3342 or 703-562-2200).
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