U.S. bank regulators see some risk in oil, gas credits

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Oil and gas loans are weighing down bank balance sheets and they could cost Wall Street even more if the economy sours, according to a study released by U.S. regulators.

A drop in oil prices in 2014 exposed risky credits that still exist for leading lenders, according to the Shared National Credit review of loans held among several banks.

The report examined leveraged loans to already-indebted borrowers which typically have a higher chance of default.

"The agencies continue to be concerned that any downturn in the economy would result in a significant increase in the already considerable adversely risk rated leveraged lending exposure," according to a report from the review.

Along with the Federal Reserve, the review is conducted by the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency.

Bank examiners faulted leveraged loans for having too-loose repayment schedules and liberal underwriting.

"It is incumbent upon lenders to fully consider all credit quality factors, including incremental facilities, prior to underwriting a transaction," according to the report.

Source: 
reuters
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