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Subject: Small Business Lending
Date: February 5, 2010
To: Chief Executive Officers of all National Banks, Department and Division Heads, and All Examining Personnel
Description: Meeting the Credit Needs of Creditworthy Small Business Borrowers
The guidance attached to this bulletin continues to apply to federal savings associations.
The Office of the Comptroller of the Currency (OCC), the other federal financial regulatory agencies, and the Conference of State Bank Supervisors (regulators) have adopted the attached Policy Statement on Meeting the Credit Needs of Creditworthy Small Business Borrowers (statement). The regulators recognize the important role of small businesses in the economy and the statement reiterates the regulators’ policies and expectations for prudent lending.
The statement builds upon principles in existing guidance, including the November 2008 Statement on Meeting the Needs of Creditworthy Borrowers (NR 2008-131) and the October 2009 Statement on Prudent Commercial Real Estate Loan Workouts (OCC Bulletin 2009-32). The statement discusses principles of sound underwriting and risk management practices. In this regard, financial institutions should consider new lending opportunities on the basis of a comprehensive review of a borrower’s financial condition while maintaining prudent lending, and concentration risk management standards. They should also have robust risk management practices to control credit risk in their lending activities. These practices include monitoring the financial condition of borrowers, which includes obtaining reliable, and current borrower financial information and assessing the borrowers’ continued capacity and willingness to repay the loan.
The OCC expects examiners to continue to take a balanced approach in assessing institutions’ underwriting and risk management practices in small business lending. Consistent with OCC longstanding policies and as a general principle, examiners should not adversely classify loans solely due to a decline in the collateral value or the borrower’s association with a particular industry or geographic location that is experiencing financial difficulties.
Financial institutions should apply the principles of the statement in accordance with their internal definitions of small business loans or as appropriate in their loan portfolios. Small business lending includes loans to small businesses and farms, such as working capital lines of credit, secured and unsecured term loans, as well as unsecured revolving credit.
For further information, contact Darrin Benhart, Director for Commercial Credit Risk at (202) 874-4564.
/signed/Timothy W. Long
Senior Deputy Comptroller for Bank Supervision Policy
and Chief National Bank Examiner