U.S. bank regulator issues bulletin on oil, gas lending risks

Wed Apr 9, 2014 7:29pm GMT
 

By Emily Stephenson

WASHINGTON, April 9 (Reuters) - A U.S. regulatory agency on Wednesday issued tips for bankers and examiners on potential risks involved with loans for oil and natural gas production, as the domestic energy boom continues.

The U.S. Office of the Comptroller of the Currency (OCC) published on its website a bulletin laying out supervisors' expectations for energy production lending and spelling out new examination procedures for banks issuing the loans.

An OCC official said examiners have operated under supervisory guidance about oil and gas lending, but industry changes, the sector's growth and increased lending to oil and gas producers prompted the agency to give more specific instructions.

The shale boom is expected to make the United States the world's top oil producer by 2015, bigger than both Saudi Arabia and Russia, according to the International Energy Agency.

Advanced drilling techniques such as hydraulic fracturing have also upended the natural gas market. The United States is expected to become a net exporter of the fuel in coming years. Just a few years ago, it had been expected to become a major importer.

The bulletin identifies commodity price volatility, liquidity pressure due to downturns in the market, and compliance issues related to environmental liabilities as risks examiners and lenders should be aware of in relation to oil and gas production. (Additional reporting by Timothy Gardner; Editing by Karey Van Hall and Jonathan Oatis)

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