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BankNet

BankNet
More resources for national banks

Problem Loans

Banks manage problem loans through loan workouts. Loan workouts can take a number of forms: simple renewal or extension of the loan terms; extension of additional credit; formal restructuring of the loan terms with or without concessions; or, in some cases, foreclosure on underlying collateral. Banks should choose the alternative that will maximize the recovery and minimize the risk on each troubled loan.

References
BC = Banking Circular
EC = Examining Circular
OCC=Bulletin

Guidelines for Collateral Evaluation and Classification of Troubled Energy Loans (Supplement 1) (EC 223-S1, June 1986)
Addresses concerns regarding the flexibility and examiner judgment supplanted to a degree by the guidelines in EC 223, August 1984

Guidelines for Collateral Evaluation and Classification of Troubled Oil and/or Gas Reserve-Based Loans (EC 223, August 1984), Guidance
Provides examiner guidelines for review of reserve-based loans

Prudent Commercial Real Estate Loan Workouts (OCC 2009-32, October 2009), Policy Statement
Provides guidance on risk management practices for loan workouts within a framework of financial accuracy, transparency, and timely loss recognition

Troubled Loan Workouts and Loans to Borrowers in Troubled Industries (BC 255, July 1991)
Covers the various types of loan workouts and accurate reporting of troubled loans