Funds Talk
July 02, 2018

Comptroller of the Currency Announces That Leveraged Lending Guidance Is Not Expected to Be Changed

On May 24, 2018, Joseph Otting, the comptroller of the currency, announced that he does not expect that the Office of the Comptroller of the Currency (OCC) will be making revisions to the 2013 Interagency Guidance on Leveraged Lending (Leveraged Lending Guidance).

“What we would look for is if they are doing it in a safe and sound manner,” Otting, the principal regulator of all national banks, said during a telephonic press conference. “We want to make sure they have the capital and the talent to evaluate that kind of activity and that the risk profile has been approved.”

This is the second time in recent months that Otting has made extemporaneous and unexpected remarks regarding the policy of federal banking regulators with respect to leveraged lending. On Feb. 27, 2018, speaking at an industry conference in Las Vegas, Otting announced that the OCC would no longer be enforcing the Leveraged Lending Guidance. “As long as banks have the capital, I am supportive of banks doing leveraged lending. When the guidance came out — it was like people were afraid to jump over the line without feeling the wrath of Khan from the regulators. But you have the right to do what you want as long as it does not impair safety and soundness. It is not our position to challenge that,” he said. Otting further indicated that the OCC would no longer challenge lending activities solely because the lending violated the guidance.

In October 2017, the Government Accountability Office ruled that the Leveraged Lending Guidance had been illegally adopted and should have been subject to congressional review under the Congressional Review Act. Additionally, on Dec. 5, 2017, then-Federal Reserve Bank Chairwoman Janet Yellen, in a letter to Rep. Blaine Luetkemeyer, stated that the Federal Reserve Board is “considering soliciting public comment on the guidance in the near term with a view to improving the clarity of the guidance and reducing any unnecessary burden.”

To date, the federal banking regulators have not issued any revised leveraged lending guidance or sought public comment on the existing guidance.

Authors and Editors

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