Regulatory agencies request comment on commercial credit exposures classification

By Sara Rosenberg

New York, March 28 - The federal bank and thrift regulatory agencies are asking for comments on proposed changes to the classification of commercial credit exposures that would create a two-dimensional rating system, one measuring the risk of the borrower defaulting and one focusing on the loss severity the institution would likely incur in the event of the borrower's default, according to a news release.

This new system would replace the current commercial loan classification system categories of "special mention," "substandard" and "doubtful."

The proposed rating system would increase consistency among the agencies in assessing the credit risk in an institution's commercial loan portfolio, the release said.

It would also more closely align the determination of a facility's accrual status with an institution's allowance for loan and lease-loss methodology and the rating assessment process, the release added.

Comments on the proposed changes are requested by June 30.

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