Big losses force banks to rethink energy lending

Unfunded loans and exposures to suppliers worry credit risk managers

oil-spill
Leaking profits: falling oil prices have hit the energy sector

Banks are being forced to rethink their approach to oil and gas lending after two years of twists, turns and stomach-churning plunges in energy prices. A sharp drop in revenues coupled with unsustainable debt burdens has contributed to a dramatic rise in borrower defaults and bankruptcy filings among energy companies – with banks setting aside huge reserves to cover potential losses.

Moody's estimates Bank of America, Citigroup, Goldman Sachs, JP Morgan and Morgan Stanley may see combined losses