US banks' troubled big loans triple in 2008

WASHINGTON, Oct 8 (Reuters) - The value of troubled large loans held by U.S. banks more than tripled in 2008, while the volume of syndicated credit commitments worth $20 million jumped at the fastest rate in a decade, bank regulators said on Wednesday.

Adversely rated credits or loans that are likely to result in some loss for the lender without corrective action, spiked to $373.4 billion from $114.1 billion in 2007.

The data shows a "significant deterioration in credit quality," said the annual credit report published by the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp and the Office of Thrift Supervision.

The report assessed syndicated loans and loan commitments of at least $20 million that are shared by three or more regulated financial institutions.

Large loans rose to $2.8 trillion in credit commitments, 22.6 percent more than in 2007. That is the largest percentage growth since 1998 and reflects the merger and acquisition financing boom that continued through the first half of 2007.

The agencies said the large loan portfolio experienced nominal growth in the last half of 2007.

"The impact of the volume of syndicated loans with structurally weak underwriting characteristics is evidenced by the rise in criticized credits this year," the agencies said.

The most common types of weak underwriting practices included liberal repayment terms, repayment dependent on refinancing or recapitalization, and nonexistent or weak loan covenants.

The criticized credits were largely concentrated in the services, commodities and manufacturing industries.

The report was based on analyses prepared in the second quarter of 2008 of credit data provided by federally supervised institutions as of the end of 2007. (Reporting by Karey Wutkowski; Editing by Tom Hals)