Federal Deposit
Insurance Corporation

4 World Financial Center
North Tower - 8th Floor
New York, NY 10080
Tel # 212-449-6916

April 8, 2005

TO: Federal Deposit Insurance Corporation
via comments@FDIC.gov

RE:  SNC Program Modernization

Merrill Lynch Bank USA (“MLBUSA”) appreciates the opportunity to comment on the proposed changes to the data collection methodology in support of the Shared National Credit Program (“Program”). We believe the proposed enhancements will be beneficial for the Program and we offer the following suggestions and comments.

Suggestions to improve submission and rating reporting software:

•  Automatic import of data: The current submission software requires extensive manual data entry and does not allow data imports from Excel or other standard import sources. Whether the new submission methodology will be via file transmission or via an internet-based technology, an enhancement to the software to enable data import would increase efficiency and reduce the potential for errors due to double entry of data.
   

• Ability to look up ratings: Under the current system, only Agencies can access the Vision database. We suggest that some type of software security feature be added to allow agents and participants to look up ratings for borrowers for which they have an outstanding loan.
   

• Ability to look up ratings: Under the current system, only Agencies can access the Vision database. We suggest that some type of software security feature be added to allow agents and participants to look up ratings for borrowers for which they have an outstanding loan.
   

• Expanded lookup options: When questions arise as to whether a borrower/facility is in the SNC program, on-site examiners do a great job of attempting to match up our borrowers and facilities with those in the Vision database. However, it seems the efforts of the examiners are hampered, at times, by the limited number of search criteria or lookup fields available. Therefore, whether lookup features are used by banks (as suggested above) or by the Agencies, we suggest that more options be made available.
   

• Minor software data entry/ease of use suggestions:

1. For participant share, allow for inputs of percentages as opposed to dollar amounts. This could help reduce the error rate and allow for fluctuations in outstandings.

 

2. Allow editing of participant entity names & information, or submission to correct these somehow in the master RSSD database (more information on this suggestion is below.)

Regulatory ID’s: We support the idea of Agency-issued Regulatory ID’s for unique facilities and borrowers, potentially using a real-time internet-based application. We believe it would benefit all if this Regulatory ID system were to be used by both Expanded and Basic Reporters. It would be helpful if the nomenclature/naming convention of the new ID included a way to link related facilities, especially for those executed under the same Credit Agreement.

Resource to determine if the Agencies regulate a Lender: We have difficulties, at times, in ascertaining whether a participant is a regulated entity, and therefore offer the following suggestions:

• It would be helpful if a comprehensive RSSD database was maintained by the Agencies that lists all regulated entities and provides other identifying information such as full entity name, location, and parent company. This would enable agents to ascertain and confirm the agency-regulated status of participants more quickly and eliminate SNC definition errors.
   

• RSSD numbers do not exist for some entities, and apparently can be typed in at random using the current submission software. There should be a process where Agencies control and maintain the RSSD list, potentially in a new internet-based database.
   

•  In connection with RSSD database maintenance, it is recommended that all bank entities be self-identified by regulated institutions via an internet-based submission.  The Agencies would then approve the RSSD add/change/delete request, and could automatically update the definitive RSSD database. Since the legal entities within a bank may change from time to time, it would be the responsibility of banks to identify when new bank entities are created, and to edit/validate the list at least once per year, well in advance of the annual SNC submission deadline.

MLBUSA does not always receive the SNC rating for transactions in which it is a participant. Much of this may be due to the RSSD list issues outlined above. Our FDIC examiners have worked hard this year to ensure that MLBUSA and its subsidiary are on the RSSD list and this may help alleviate the problem. The suggestions above regarding greater information and control of the RSSD list should help as well.

Delivery of Reports and Data: We strongly support the proposal that SNC program data be available to Basic and Expanded reporters, as aggregate data would be useful in a variety of ways, such as real-time updates on shared credits in which we participate, for benchmarking, and for overall risk management trends. We support the suggestion that raw data tables would be provided to banks; banks will then create a variety of reports from this data based on each bank’s varying reporting and risk management needs.

While we believe that we will be able to receive feedback data and reports in electronic format by 2007 as proposed, this ability could be dependent on the timing of certain decisions by the Agencies. As a result, we believe that manual reporting options should remain available under certain circumstances beyond that date.

SNC Borrower identification method options: Of the options suggested, we recommend use of the Taxpayer ID for the borrowing entity, as this number is universal for US borrowers, whereas something like a ‘MKMV’ may not be. We further suggest that a system to identify corporate entity hierarchy and the borrowing entity’s location within the hierarchy be considered when assigning the Regulatory ID’s, as discussed above, and this hierarchy should be used in conjunction with the Taxpayer ID.

Aggregating related borrowers and SNC information: In regard to the question on how to best aggregate information on the same borrower, we recommend that the Agencies consider clarifying the SNC definition, and of course, that the submission software match, and even enforce, the definition. This year we were instructed to apply the SNC eligibility tests at the facility level instead of the credit agreement level. Thus, loans for the same borrower(s) are not always being submitted, nor reviewed in the SNC program. By way of example, assume one credit agreement provides for three separate facilities:

•  Term A loan in the amount of $200 million with one regulated bank as a participant

•  Term B loan in the amount of $20 million with three regulated banks as participants

•  Revolving facility in the amount of $20 million with three regulated banks as participants

Under the current reporting definition as we understand it, the reporting thresholds of $20 million and 3 regulated bank entities are applied at the facility level and therefore the $200 million Term A loan would be excluded from the SNC report, leaving only the smaller portions of the of the same ‘transaction’ within the Program.

The facility-level test seems to have the effect of excluding (in whole or in part) certain borrowers and facilities from the program. Given the goals of the SNC Program to review each credit once, it may be more appropriate for the tests to remain at the credit agreement level and include all facilities therein.

Once again, we appreciate the opportunity to comment on the proposed changes to the examination data collection and technology initiatives that support the Program, and we look forward to the benefits the Modernization effort will provide.

cc:

Cecilia Barry, FDIC
DiAnn Bielacyzc, FDIC