Internal credit-monitoring designation for loans showing early signs of deterioration (margin compression, customer loss, management turnover, or approaching covenant cushion) but not yet impaired or on nonaccrual. The first stage in the source's five-stage credit loss lifecycle: Performing → Watchlist → Nonaccrual → Workout → Realized Loss. Watchlist loans receive enhanced monitoring (monthly financials, lender on-site visits) and may be marked down modestly to reflect heightened risk.