On March 27, 2014, the United States Office of the Comptroller of the Currency (the "OCC") released the Comptrollers Handbook on Asset Based Lending (the "Handbook").
The Handbook provides guidance to bank examiners in the US and bankers regarding asset based lending ("ABL") activities and risks, prudent credit risk management and underwriting expectations, credit administration, and credit risk rating. It is one of the efforts undertaken by the OCC to increase training of bank examiners to improve their understanding of ABL credits and to eliminate inconsistency in the application of risk-rating classifications to credit facilities involving ABL. The topics addressed in the Handbook include ABL structures, credit analysis, evaluating borrower liquidity, establishing a borrowing base and prudent advance rates, collateral controls and monitoring systems, and credit risk rating considerations.
While the supervisory expectations of the OCC articulated in the Handbook may not apply to Canadian ABL bankers, the Handbook will certainly be of interest to the market since it provides a comprehensive overview of ABL credits.
The Handbook can be accessed here.
The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.
© McMillan LLP 2014
