On Feb. 27, 2018, Joseph Otting, the comptroller of the Currency, the principal regulator of all national banks, speaking at a conference hosted by the Structured Finance Industry Group in Las Vegas, NV, announced that the Office of the Comptroller of the Currency (OCC) would no longer be enforcing the 2013 Interagency Guidance on Leveraged Lending (Leveraged Lending Guidance). Commenting on the Leveraged Lending Guidance, Otting said, “As long as banks have the capital, I am supportive of banks doing leveraged lending. When the guidance came out – it was like people were afraid to jump over the line without feeling the wrath of Khan from the regulators. But you have the right to do what you want as long as it does not impair safety and soundness. It is not our position to challenge that.” Mr. Otting further indicated that the OCC would no longer challenge lending activities solely because the lending was violative of the guidance.
In October 2017, the Government Accountability Office ruled that the Leveraged Lending Guidance had been illegally adopted and should have been subject to congressional review under the Congressional Review Act. Additionally, on Dec. 5, 2017, then-Federal Reserve Bank Chairwoman Janet Yellen, in a letter to Representative Blaine Luetkemeyer, stated that the Federal Reserve Board is “considering soliciting public comment on the guidance in the near term with a view to improving the clarity of the guidance and reducing any unnecessary burden.” To date, the federal banking regulations have not issued any revised leveraged lending guidance or sought public comment on the existing guidance.