Comptroller of the Currency Joseph Otting said he is "supportive" of banks doing leveraged lending, as long as they have sufficient capital, Reuters reported Feb. 27.
"[Y]ou have the right to do what you want as long as it does not impair safety and soundness," Otting said during a conference in Las Vegas earlier this week. "It's not our position to challenge that."
Financial institutions have relied on syndicated loans when investment-grade credit is not available. In 2013, the Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency issued guidance outlining expectations on how banks review and assess corporate borrowers before extending large, risky loans.
In October 2017, the government's auditor ruled that the guidance constitutes a "rule" and is therefore subject to Congressional review, meaning that lawmakers could exercise their power to nullify the guidance.
The regulators later reportedly said they were interested in reviewing and revising the guidance. While Otting's comments clarify his agency's stance on leveraged lending, the OCC did not provide more detail on exactly how the agency plans to police activity at banks.
