Work for the Comptroller associated with the Currency (OCC) is issuing guidance to national banking institutions, federal cost cost savings associations, and federal branches and agencies (collectively, banks) concerning the part of casual or implied expressions of help from international governments (suggested sovereign help) in determining a debtor’s obligor and center credit danger ranks. This guidance reminds banks that such expressions of informal or implied support should be viewed as no more than a mitigating factor when evaluating a borrower’s credit risk because implied sovereign support is not a legally binding guarantee.
Note for Community Banks
This guidance pertains to all OCC-supervised banking institutions that have actually international credit exposures.
This bulletin provides help with
- obligor and center credit risk ranks that mix implied sovereign help as being a mitigating factor.
- the adequacy of bank policies to steer the recognition and application of suggested sovereign support.
Danger Ratings That Provide Implied Sovereign Help
A bank’s analysis of the sovereign’s capability to informally help an obligor must be predicated on an evaluation associated with the sovereign’s monetary energy and any liquidity or constraints that are legal might impact the timeliness of these help. The probability of implied sovereign support being recognized for an obligor is dependent upon the sovereign’s legal and obligations, the ownership or control over an obligor, therefore the sovereign’s ability and willingness to aid the obligor. Continue reading