Federal Banking Agencies Revamp Guidance on Leveraged Lending
The federal banking agencies have jointly issued guidance on leveraged lending activities by financial institutions. The new guidance updates and replaces guidance from more than a decade ago in light of changes in market practices and growth in the volume of leveraged credit. The guidance outlines “minimum expectations” for financial institutions with substantial exposures to leveraged lending activities, focusing on several key areas, including underwriting and valuation standards and guidelines for evaluating the financial support of deal sponsors. Guidelines for the purchase of participations involving leveraged loans also are included.