April 6, 2017 - In case you missed it, there is potentially momentous – if Washington-centric – news on Leveraged Lending Guidance. Last Friday, Senator Toomey (R-PA) sent a letter to the Government Accountability Office (GAO) asking whether the Leveraged Lending Guidance actually was a “rule” in guidance’s clothing, Politico Pro and American Banker reported. Why does this matter? It could, theoretically, mean that Leveraged Lending Guidance is changed – or even goes away.

Here’s the nitty-gritty. The Congressional Review Act permits Congress to reject rules finalized within the prior 60 legislative days (as has been done with certain regulations in recent months). While the Leveraged Lending Guidance was issued in 2013, Senator Toomey argues that because it is, in fact, a rule, the banking agencies must resubmit the Guidance to Congress for Review. This would reset the 60-day clock and allow Congress to kill the Guidance with a simple majority. Senator Toomey has asked the GAO to respond on whether the Guidance is a rule by June 1st.

In fact, the definition of a rule does appear broad according to the CRA definition: “‘[R]ule’ means the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency and includes the approval or prescription for the future of rates, wages, corporate or financial structures or reorganizations thereof, prices, facilities, appliances, services, or allowances therefor or of valuations, costs, or accounting, or practices bearing on any of the foregoing”.

The Leveraged Lending Guidance has had a significant effect on the leveraged loan market (and a non-trivial effect on non-leveraged loans that are nonetheless swept up in the leveraged categorization). While this was just one of two letters that Senator Toomey sent – the other addressed the CFPB’s indirect auto lending bulletin – the LSTA will be following the “Guidance vs. Rule” issue closely.

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