12.05.25

US Regulators Relax Leveraged-lending Guidance for Banks

by: Reuters

U.S. regulators have rolled back rules put in place after the 2008 financial crisis that limited how much risk banks can take in corporate lending and fueled the boom in the multitrillion-dollar private credit industry. The so-called leveraged lending guidance was put in place in 2013 as part of a crackdown on banks’ ability to make riskier loans. The rules effectively made banks unable to underwrite higher-risk loans for companies like private-equity targets or for high-growth technology companies that had negative-to-no earnings. Regulators tended to see any loan worth more than six-times a company’s annual earnings as too risky. If banks lent out the funds anyway, they would be subject to costly demerits from their overseers. The U.S. Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation said on Friday they are withdrawing the guidance on leveraged lending, and that banks will now be expected to apply broad credit-risk standards to leveraged lending.

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