NR-93-62 "Interagency Statement on the Supervisory Definition of
Special Mention Assets" 6/93
 
OCC, FDIC, FRB AND OTS Joint Release 

NR 93-62 

Joint Statement                   Office of the Comptroller of the Currency
                                      Federal Deposit Insurance Corporation
                                                      Federal Reserve Board
                                               Office of Thrift Supervision

For immediate release 

Interagency Statement on the Supervisory Definition of Special Mention
Assets
 
June 10, 1993 

The March 10, 1993 Interagency Policy Statement on Credit Availability
indicated the federal banking and thrift regulatory agencies would issue
guidance clarifying use of the Special Mention definition for regulatory
supervision purposes. The four agencies have agreed on the definition of
"Special Mention" as stated below. This definition should also be
considered by an institution when performing its own internal asset
review.

The definition of Special Mention is as follows: 

     A Special Mention asset has potential weaknesses that deserve
     management's close attention. If left uncorrected, these potential
     weaknesses may result in deterioration of the repayment prospects for
     the asset or in the institution's credit position at some future
     date.  Special Mention assets are not adversely classified and do not
     expose an institution to sufficient risk to warrant adverse
     classification.
 
In the past, the agencies used different terminology and definitions for
Special Mention. Supervisory reports and their contents also varied
between agencies. The use of a common definition will lead to more
consistent application of supervisory procedures. The definition will also
enable examiners to more readily segregate Special Mention assets from
those warranting adverse classification. It will also ensure that the
Special Mention category is not used to identify an asset which has as its
sole weakness credit data exceptions or collateral documentation
exceptions that are not material to the repayment of the asset.
 
The agencies are in the process of developing examiner guidance explaining
how the Special Mention category will be used in the assessment of the
overall condition of an institution. The agencies have agreed to conform
their policies and guidance to the following principles:

  *  Classified assets, which by definition do not include Special Mention
     assets, will be the standard measure used in expressing the quality
     of a bank or thrift's loan portfolio and other assets. The agencies
     will not express asset quality in terms of "criticized assets," a
     term that is generally recognized as including both Special Mention
     and classified assets.

  *  The agencies will ensure their policies, examiner guidance, and
     internal monitoring systems do not call for internal reporting of
     criticized asset totals or percentages. However, examiners will
     continue to consider the level and trends of assets categorized as
     Special Mention in their analysis as appropriate.

  *  In implementing Section 132 of the FDIC Improvement Act, Standards
     for Safety and Soundness, the agencies will use classified assets and
     not use criticized assets as a measure of asset quality.

  *  Special Mention assets will not be combined with classified assets in
     reports of examination or in corporate applications.
 
Each agency will make appropriate revisions to its examiner guidance, and
all will work to ensure their guidances are consistent among the agencies.
The guidance will emphasize that it is inappropriate to use the Special
Mention category to capture loans solely because of their nature or type,
such as small business lending or affordable housing lending.
 
Implementation of the revised definition will be effective immediately.
Examiner guidance will be forthcoming shortly.