FED adopted the proposal to extend for three years, without revision, the recordkeeping provisions associated with guidance on leveraged lending (FR 4203; OMB No. 7100-0354). FED did not receive any comments to the related consultation, the comment period for which expired on September 03, 2019. The reporting frequency of FR 4203 is occasional and there are no reporting forms associated with this information collection.
The guidance outlines high-level principles related to safe-and-sound leveraged lending activities. The guidance includes a number of voluntary recordkeeping provisions that apply to financial institutions engaged in leveraged lending activities, for which FED is the primary federal supervisor; these financial institutions include bank holding companies, savings and loan holding companies, state member banks, and state-chartered branches and agencies of foreign banks that engage in such activities. The guidance states that institutions should maintain:
- Well-defined underwriting standards that, among other things, define acceptable leverage levels and describe amortization expectations for senior and subordinate debt
- Sound management information systems that enable management to identify, aggregate, and monitor leveraged exposures and comply with policy across all business lines
- Strong pipeline management policies and procedures that, among other things, provide for real-time information on exposures and limits and exceptions to the timing of expected distributions and approved hold levels
- Guidelines for conducting periodic portfolio and pipeline stress tests to quantify the potential impact of economic and market conditions on the institution's asset quality, earnings, liquidity, and capital
Many community banks are not subject to the guidance because they do not engage in leveraged lending. The limited number of community and smaller institutions that are involved in leveraged lending activities may discuss with FED how to implement these collections of information in a manner that is appropriate for the complexity of their exposures and activities. The estimated number of respondents for this information collection is 40.
Related Link: Federal Register Notice
Keywords: Americas, US, Banking, FR 4203, Leveraged Lending, Information Collection, Credit Risk, Reporting, FED
Previous ArticleFASB Issues Summary of Tentative Board Decisions at October Meeting
PRA, via the consultation paper CP12/20, proposed changes to its rules, supervisory statements, and statements of policy to implement certain elements of the Capital Requirements Directive (CRD5).
EIOPA published the financial stability report that provides detailed quantitative and qualitative assessment of the key risks identified for the insurance and occupational pensions sectors in the European Economic Area.
EBA published its risk dashboard for the first quarter of 2020 together with the results of the risk assessment questionnaire.
EBA announced that the next stress testing exercise is expected to be launched at the end of January 2021 and its results are to be published at the end of July 2021.
PRA published the consultation paper CP11/20 that sets out its expectations and guidance related to auditors’ work on the matching adjustment under Solvency II.
MAS published a statement guidance on dividend distribution by banks.
APRA updated its capital management guidance for banks, particularly easing restrictions around paying dividends as institutions continue to manage the disruption caused by COVID-19 pandemic.
FSB published a report that reviews the progress on data collection for macro-prudential analysis and the availability and use of macro-prudential tools in Germany.
EBA issued a statement reminding financial institutions that the transition period between EU and UK will expire on December 31, 2020; this will end the possibility for the UK-based financial institutions to offer financial services to EU customers on a cross-border basis via passporting.
SRB published guidance on operational continuity in resolution and financial market infrastructure (FMI) contingency plans.