ECB Publishes Draft US-Style Guidance On Leveraged Transactions

On 23 November 2016, the European Central Bank ("ECB") published for consultation draft guidelines on leveraged transactions ("Draft Guidance"), similar to the US Guidance on Leveraged Lending issued by the US federal bank regulatory agencies in 2013 ("US Guidance"). The aim of the Draft Guidance is to promote sound origination and distribution practices in the leveraged lending market. Interested parties will have the opportunity to comment on the Draft Guidance until 27 January 2017.

Background and Scope

The publication of the Draft Guidance and the opening of the consultation come at a time when the ECB has increasingly been monitoring credit quality and leveraged finance exposures as a result of its survey of 40 banks last year that revealed a 35% increase in risky loans between 2012 and 2015. The survey also highlighted the fierce competition that currently exists in the leveraged finance markets, which are characterised by ultra-low interest rates, a