On November 7, 2014, the Office of the Comptroller of the Currency (“OCC”), the Board of Governors of the Federal Reserve System (“Federal Reserve”) and the Federal Deposit Insurance Corporation (“FDIC”) (collectively, the “agencies”) released the widely anticipated answers to Frequently Asked Questions (the “FAQs”) relating to the March 2013 interagency guidance on leveraged lending (the “2013 Guidance”). The agencies simultaneously released the Shared National Credit (“SNC”) Program 2014 Review, which includes a supplement relating exclusively to leveraged loans (the “SNC Leveraged Loan Supplement” and, together with the FAQs, collectively, the “Additional Guidance”).
The Additional Guidance provides insight into how the agencies are interpreting and implementing the criteria set forth in the 2013 Guidance, and is designed to assist in the development of a shared understanding among the industry and examiners of supervisory expectations for safe and sound underwriting of leveraged loans. The Additional Guidance also sends a direct warning to originators of leveraged loans, either to ensure that their leveraged loan businesses are conducted in line with the 2013 Guidance or to shut them down.
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