Federal bank regulatory agencies released updated supervisory guidance on leveraged lending. The guidance covers transactions characterized by a borrower with financial leverage that significantly exceeds industry norms. The guidance focuses attention on key areas that include: establishing a sound risk-management framework; underwriting standards; valuation standards; pipeline management; reporting and analytics; risk rating leveraged loans; participants; and stress testing. This guidance applies to financial institutions supervised by the agencies that engage in leveraged lending activities.
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