...Limited Impact... for Now: Fitch believes that most of its rated U.S. banks with exposure to the energy sector should be able to withstand the recent decline in energy prices over the near term. For a few producers, current prices are below break-even. However, the impact to banks will be determined by the duration and severity of price declines given that much of the energy lending activity is typically hedged out by borrowers for 12¡24 months. Hedges typically reduce the effect of volatile crude price using futures contracts that lock in fuel prices in advance. Duration and Severity of Decline Ke y Concern: The main risks for most U.S. banks would be a prolonged decline in energy prices. In a scenario where oil prices are sustained at or below $60 per barrel (using Brent Index) into second-half 2015 (below the assumption in Fitch' s Global Economic Outlook), Fitch believes there may be some weakness in loan performance tied to energy and a potential rise in provisions for credit losses....
