On December 5, 2025, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) jointly rescinded the 2013 Interagency Guidance on Leveraged Lending and the subsequent 2014 FAQs, a move that reverses a decade‑old post‑crisis constraint on banks' sponsored leveraged‑loan activity. According to the agencies' announcement, the guidance had become "overly restrictive," unintentionally swept in certain investment‑grade credits, and redirected leveraged‑loan volume into the unregulated nonbank sector , outcomes the regulators said undermined supervisory oversight and market resilience. [1][3][6]
The rescission instructs banks to manage leveraged‑lending risks under general safe‑and‑sound banking principles tailored to each institution’s risk appetite rather than by a prescriptive interagency framework. Banks are expected to implement pipeline controls, robust underwriting (including de‑levering and refinancing stress testing), consistent bank‑wide definitions of "leveraged loans," independent credit assessment processes for participations, and ongoing monitoring, with examiners focusing on underwriting quality, internal ratings and allowance adequacy. The agencies emphasised that any future, more specific leveraged‑lending guidance would follow notice‑and‑comment procedures. [1][3][4]
Market participants and advisers immediately flagged the practical implications. Industry analysis suggests the change will make it easier for banks to compete with private‑credit providers and bring a portion of previously off‑balance‑sheet activity back under bank supervision, while placing greater reliance on banks' internal risk frameworks and boards. Some commentators warned that the shift increases reliance on supervisory judgement and institutions' governance, heightening the importance of clear risk limits and independent credit oversight. [2][4][6]
Regulatory and legal context underpinned the agencies' decision. The OCC and FDIC noted the Government Accountability Office had determined the 2013 guidance qualified as a "rule" under the Congressional Review Act and was not submitted to Congress, a procedural defect that contributed to the agencies' decision to withdraw the issuances. Observers pointed to expectations that the Federal Reserve may take corresponding action; commentators also contrasted the rescission with contemporaneous regulator efforts to modernise supervisory approaches across other risk areas. [1][3][5]
Practical supervisory guidance accompanying the rescission reiterates longstanding supervisory priorities: rigorous documentation, stress testing, timely risk rating and reserves, limitations on relying on uncertain future equity raises as primary repayment sources, and meaningful management information systems. The OCC separately has signalled a broader recalibration of bank supervision , including updated expectations for newer forms of credit and balance‑sheet exposures , while advising that venture‑style and other higher‑risk lending continue to attract heightened capital and provisioning scrutiny. [1][3][7]
The policy shift arrives amid wider debate about the regulatory perimeter for finance. Regulators, legislators and industry groups have been wrestling with the trade‑off between curbing excessive risk‑taking and avoiding regulatory arbitrage that pushes activity to less‑regulated actors. Proponents of the rescission argue it will reduce distortionary effects that drove lending into nonbanks; critics caution it may relax constraints too far unless counterbalanced by robust internal controls and examiner scrutiny. The agencies' promise to subject any future leveraged‑lending guidance to notice‑and‑comment may temper concerns by creating a public rulemaking record should more prescriptive standards be proposed. [2][4][5]
As banks, investors and private‑credit firms adjust to the new supervisory posture, the immediate focus will be on how institutions translate broad safe‑and‑sound principles into enforceable limits and whether examiners will adopt new, consistent approaches to assessing risk‑taking across institutions. Industry advisers expect a period of intensified supervisory engagement as examiners test whether banks' board‑level risk appetite statements, underwriting policies and monitoring systems meet the agencies' expectations. [1][3][6]
##Reference Map:
- [1] (JD Supra / Troutman Pepper) - Paragraph 1, Paragraph 2, Paragraph 5, Paragraph 7
- [3] (OCC news release) - Paragraph 1, Paragraph 2, Paragraph 5, Paragraph 7
- [2] (Reuters) - Paragraph 3, Paragraph 6
- [4] (PwC) - Paragraph 2, Paragraph 3, Paragraph 6
- [6] (Sullivan & Cromwell) - Paragraph 1, Paragraph 3, Paragraph 7
- [5] (American Banker) - Paragraph 4, Paragraph 6
- [7] (OCC 2013 guidance) - Paragraph 5
Source: Noah Wire Services