Regulators Clarify Leveraged Lending Guidance
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- Federal bank regulatory agencies have provided some additional clarity regarding their April 2013 Interagency Guidance on Leveraged Lending, which had created uncertainty in the leveraged lending market.
- In their annual Shared National Credits review, the agencies have now made clear their displeasure with the progress that regulated institutions have made thus far in adopting and implementing the Guidance and their desire to capture the attention of these institutions and trigger further meaningful change in the “safety and soundness of bank underwriting and risk management practices relative to the expectations articulated” in the guidance.
- It now appears even more likely that the guidance will cause a tightening in underwriting policies at regulated institutions and that it may well ultimately lead to a relatively smaller role in the leveraged finance market for loans arranged by regulated institutions (such as both US and non-US banks) and a larger role for less regulated providers and products.