FDIC Advisory on Effective Credit Risk Management Practices for Purchased Loan Participations
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This Document Has Been Retired.

FDIC Advisory on Effective Credit Risk Management Practices for Purchased Loan Participations

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  • Publisher's site:
  • Description:
    Financial institutions purchase loan participations to achieve growth and earnings goals, diversify credit risk, and deploy excess liquidity. Some institutions have successfully participated in shared credit facilities, which are arranged by bank and nonbank entities, by implementing effective due diligence and prudent credit risk management practices. However, purchasing banks' over-reliance on lead institutions has, in some instances, caused significant credit losses and contributed to bank failures, particularly for loans to out-of-territory borrowers and obligors involved in industries unfamiliar to the bank. This Advisory reminds state nonmember institutions of the importance of underwriting and administering loan participations in the same diligent manner as if they were being directly originated by the purchasing institution.
  • Content Notes:
    Attachment included in FIL
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  • Withdrawn Date:
    Not Available
  • Agencies Involved:
    Federal Deposit Insurance Corporation (FDIC)
  • Fdic Employee Involved:
    William R. Baxter
  • Source:
    FDIC Website
  • Memorandum To:
    FDIC-Supervised Banks (Commercial and Savings)
  • FIL Number:
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Version 3.26