Classification of Commercial Credit Exposures Notice for Public Comment on Interagency Proposal
FIL-22-2005 March 28, 2005
The Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Office of Thrift Supervision are requesting comment on the attached joint proposal to revise the classification system for commercial credit exposures. Comments are due by June 30, 2005.
The proposed classification system would be used by institutions and supervisors for the uniform classification of commercial and industrial loans, leases, receivables, mortgages, and other extensions of credit made for business purposes, based on an assessment of borrower creditworthiness and estimated loss severity.
The proposal would replace the current commercial loan classification categories “special mention,” “substandard” and “doubtful” with a two-dimensional-based framework built upon two distinct ratings:
Borrower rating – rates the borrower’s capacity to meet financial obligations, and
Facility rating – rates a facility’s estimated loss severity.
As proposed, institutions may incorporate this framework into their internal risk rating systems or, alternatively, they may map their internal rating system into the supervisory framework.
The FDIC encourages all institutions to review the attached Federal Register notice and to comment on their ability to implement the proposed classification system.
FDIC-Supervised Banks (Commercial and Savings)