Federal Banking Agencies Propose Revised Guidance on Leveraged Finance
On March 26, 2012, the federal banking agencies jointly issued for comment revised guidance on leveraged lending activities by banking organizations. The proposed guidance outlines minimum regulatory expectations for financial institutions with “substantial exposures” to leveraged finance activities, focusing on several key areas, including underwriting and valuation standards and guidelines for evaluating the financial support of deal sponsors. While the proposed guidance does not represent a fundamental change in the agencies’ view of leveraged lending, it does reflect heightened regulatory focus on sound and well-documented lending and risk management practices.