WASHINGTON, July 29 (Reuters) - U.S. banks are weighted down by loans to the struggling energy industry and risky credits to the commercial sector but underwriting standards improved early this year, according to a Friday report from leading bank regulators.
Banks are working through a downturn in the oil and gas sector and loans to already-indebted companies but fresh loans are being written to a higher standard, according to the review from the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp.
“Agencies noted improved underwriting and risk management practices related to the most recent leveraged loan originations,” according to the review of the first three months of the year.
Banks have pared back leveraged lending to a negligible volume, concludes the Shared National Credits report.
In March 2013, regulators warned banks to monitor their revolving loans and other credits to indebted companies and Friday’s report indicated many banks were complying.
A decline in energy prices since 2014 could continue to hurt banks if oil and gas companies cannot make loan payments or they get pushed to default, the regulators said.
Still, regulators warned that too-loose lending that remained on bank books could weight on the industry in a credit downturn. (Reporting By Patrick Rucker)