April 19, 2018 - Since the Comptroller of the Currency spoke at Las Vegas in February, rumors have been flying that Leveraged Lending Guidance is dead. In fact, it is not. Below, we discuss what the Comptroller said in his speech as well as recap what we’ve heard – from very good sources – about the future of the Guidance.

Comptroller Otting was a keynote speaker at ABS Vegas, taking many questions from the audience. In response to a question on Leveraged Lending Guidance (that came from an unnamed LSTA staffer), Comptroller Otting did in fact say that “banks should do the lending they want…subject to safety and soundness.” That last “subject to safety and soundness” is a critical caveat that was largely lost in the coverage. In fact, the OCC’s 12-CFR-30 lays out their safety and soundness mandate – and much of the language in the Leveraged Lending Guidance echoes what is in 12-CFR-30. As we have been told, the Leveraged Lending Guidance is the method by which banking regulators communicate their safety and soundness responsibilities.

So, the safety and soundness mandate is unlikely to go anywhere. However, there are rumblings that the banking agencies may be willing to engage in a conversation around refining the leveraged lending guidance. This was first recommended in last summer’s Treasury Report on Banks and Credit Unions. In addition, in the wake of the Government Accountability Office (GAO) opinion that Leveraged Lending Guidance was a rule for the purposes of the Congressional Review Act (CRA), the heads of the OCC, Fed and FDIC sent letters to Representative Luetkemeyer saying that they were willing to revisit the Guidance. We strongly believe these sentiments continue and have been working with our members to identify places where the Guidance could be sensibly refined. For more information, contact mcoffey@lsta.org or tvirmani@lsta.org.