March 6, 2018 - Is Leveraged Lending Guidance most likely to be 1) scrapped, 2) refined, or 3) unchanged? Folks reading reports from Comptroller Otting’s talk at SFIG Vegas may well select Option 1 (“scrapped”). However, Option 2 (“refined”) might the more probable answer. Below, we discuss what we heard from Comptroller Otting (live) and Chairman Powell (through testimony).

Last Tuesday, we were in the audience during Comptroller Otting’s discussion at SFIG Vegas and heard similar words to those reported by Reuters, Debtwire and the New York Post(?!). However, we also heard what might have been a few dog whistles as well. First, we heard that leadership (previously) treated Leveraged Lending Guidance as a rule, and they are (now) moving toward treating it as guidance. Our notes – admittedly in atrocious handwriting – have Comptroller Otting reiterating that guidance is guidance, that MRAs or MRIAs shouldn’t be issued under guidance and that banks should do the leveraged lending they want as long as it doesn’t affect their safety and soundness.

Meanwhile on Tuesday, Fed Chairman Powell was testifying before the House Financial Services Committee. Congressman Leutkemeyer – author of the November 2017 letter asking the banking regulatory heads when they were going to respond to the GAO’s decision that Leveraged Lending Guidance was a rule for the purposes of the Congressional Review Act – took up the issue again. Congressman Leutkemeyer said he had heard reports that banks have “outstanding matters requiring attention, or MRAs, based on the guidance…and that they’re still being told…to treat guidance as binding regulations.” He asked Chairman Powell, “Would you agree that rules are rules and guidance is guidance, and guidance is not binding?”

Chairman Powell responded, “I would agree absolutely with that. And I think in the case of the leveraged-lending guidance, we — we do accept and understand that that’s nonbinding guidance. And in fact, since the GAO ruling, we’ve made it a point to go out and make sure that that message is getting out to supervisors in banks. And we’re also thinking of — we’re in discussions and thinking about other ways we can underscore that, perhaps putting it out for further comment.”

So it may be that the heads of the Federal Reserve and the OCC agree that guidance is guidance and should not be the basis for MRAs or MRIAs.  And perhaps they are amenable to refining it – and turning it into actual guidance – as opposed to scrapping it. The LSTA continues to be engaged on this issue, both with our Leveraged Lending Guidance working group and with the agencies. For more information, please contact or

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