WASHINGTON – In a move that’s raising eyebrows on Wall Street and in regulatory circles, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) have jointly gutted key guidelines for leveraged lending. The agencies announced December 5, 2025, that they are rescinding the “Interagency Guidance on Leveraged Lending” (dated March 21, 2013) and the related “Frequently Asked Questions” (November 7, 2014).
The agencies claim the previous guidance was “overly restrictive,” stifling bank participation in a lucrative market traditionally used by businesses for mergers, acquisitions, and buyouts. They argue the rules pushed lending activity toward non-bank entities, escaping federal oversight. This is a classic case of regulators siding with profit margins over prudence, letting the big banks gamble with even more leverage.
The 2013 guidance, and its subsequent FAQ, aimed to ensure banks adequately managed the risks inherent in lending to highly indebted companies. The rescission means banks are now expected to adhere only to “general principles for safe and sound lending” when dealing with leveraged loans. What constitutes “safe and sound” is, conveniently, left open to interpretation. Expect a race to the bottom as banks compete to make the riskiest loans possible.
Adding fuel to the fire, a U.S. Government Accountability Office audit revealed the original 2013 guidance should have been submitted to Congress for review under the Congressional Review Act – but wasn’t. This procedural lapse provides another layer of justification for the agencies’ decision to scrap the rules, but it’s a convenient excuse for a policy shift that benefits the financial industry.
The agencies insist banks should still focus on managing credit and liquidity risks, establishing a clear risk appetite, and aligning lending activities with that appetite. But without specific guidelines, these principles are toothless. We’re talking about billions of dollars flowing into deals where companies are already drowning in debt. It’s a recipe for disaster, and taxpayers will likely be on the hook when the inevitable defaults hit.
Grimy Times will continue to monitor this situation closely. This isn’t about helping businesses grow; it’s about loosening the reins on reckless lending and prioritizing bank profits over financial stability. The deregulation of leveraged lending is a ticking time bomb, and we’re bracing for the fallout. Expect more bailouts down the line.
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Key Facts
- Agency: FDIC
- Category: Fraud & Financial Crimes
- Source: Official Source â†â€â€ÂÂÂ
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