US Bank Regulators Ease Post-Crisis Curbs on Leveraged Loans

Core Viewpoint - US banking agencies are easing regulations from the Obama era that were deemed overly restrictive, particularly affecting the private credit industry [1][2]. Regulatory Changes - The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) criticized the 2013 guidance as "overly restrictive" and "overly broad," leading to a significant market share decline for regulated banks in leveraged lending [2][5]. - The original guidance was intended to combat weakening lending standards as private debt issuance increased, but it inadvertently pushed business to nonbank lenders [5][7]. Industry Impact - The easing of regulations is expected to allow banks to engage in riskier lending activities, which could help meet the credit needs of businesses [6]. - Despite the relaxed rules, banks will still face some restrictions, ensuring that the lending environment does not become excessively lenient [6]. Market Dynamics - The previous stringent regulations led to "regulatory arbitrage," where lending shifted to lightly regulated private lenders, moving outside federal oversight [7].