Regulators Find Increased Risks Associated With Leveraged Lending

Federal banking agencies, in a review conducted under the Shared National Credit ("SNC") program, found increased risks associated with leveraged lending. The SNC program is conducted by the Federal Reserve Board, the FDIC and Office of the Comptroller of the Currency (collectively, the "agencies"). The program is a "review and assessment of risk in the largest and most complex credits shared by multiple regulated financial institutions."

The agencies reviewed loan commitments that originated before March 31, 2018. The agencies found that:

• risks associated with leveraged lending activities are going up;
• numerous leveraged loan transactions have "weakened transaction structures" and "increased reliance upon revenue growth or anticipated cost savings and synergies to support borrower repayment";