This story appeared in Bank Digest.
The Federal Deposit Insurance Corp. has alerted supervised institutions to final guidance on leveraged lending issued jointly with the Office of the Comptroller of the Currency and Federal Reserve Board. The guidance outlines high-level principles related to safe and sound leveraged lending activities, including underwriting considerations, assessing and documenting enterprise value, risk management expectations for credits awaiting distribution, stress-testing expectations, pipeline portfolio management, and risk management expectations for exposures held by the institution. According to the FDIC, institutions engaged in leveraged lending should define this activity in their credit policies and establish prudent risk management processes consistent with the final guidance.