Banks that lend to energy sector have more problem assets, FDIC officials say

6 September 2018 2:06am
Banks that lend heavily to oil and gas producers have seen significant increases in problem assets and “financial stress” as a result of a steep drop in energy prices in recent years, US Federal Deposit Insurance Corporation officials said.

The officials, in an article in the latest FDIC quarterly, said some of these banks showed “evident” risk-management weaknesses, including underwriting laxity, a loosening of credit terms, and limited coverage of lending exposures in loan policies.

“The ongoing recovery and uncertainty in [oil and gas] prices may continue to challenge banks with direct or indirect exposure to this sector,” said the article by Lisa Garcia and Kenneth Weber, both of the FDIC’s risk management supervision division.

The article released Wednesday, based in part on FDIC examinations of hundreds of banks between Texas and North Dakota, added: “Banks with significant direct lending exposure to the [oil and gas] sector have seen greater increases in problem assets than other banks".