The FDIC, Federal Reserve, and OCC have issued joint guidance on the practice of leveraged lending (the “Guidance”). Although definitions of “leveraged lending” vary, generally speaking the practice involves the making of loans to highly-leveraged commercial borrowers or the making of loans to borrowers for the purpose of buyouts, acquisitions, or capital distributions.
Entries in Commercial Lending (13)
The FDIC has announced that it will host a webinar titled Opportunities for Community Banks – Federal Guarantee Programs that Support Export Lending to Small Business. The Webinar will take place on Thursday, April 18, 2013, from 3:00 to 4:00 pm (ET).
The Webinar will discuss federal loan guarantee programs designed to support lending to small businesses engaged in the exporting of goods. Representatives from the USDA, SBA, and Export-Import Bank will provide overviews of their respective programs. Interested parties must register for the webinar by April 12.
The American Bar Association Business Law Section recently published a new book, The Law of Guaranties: A Jurisdiction-by-Jurisdiction Guide to U.S. and Canadian Law. The Maine chapter is co-authorized by Verrill Dana attorneys Mark K. Googins and Alistair Y. Raymond, and Christopher J. Devlin, a former Verrill Dana attorney and now Senior Counsel in the Investments Division of UNUM Group. The book serves as a resource for commercial lenders and attorneys on the law of guaranties in various jurisdictions across the United States and Canada. For more information about this book, including information on how to purchase it, please visit the American Bar Association website.
On October 18, 2012, the Office of the Comptroller of the Currency (OCC) issued stress testing guidance for national banks and federal savings associations with total assets of $10 billion or less (community banks). Stress testing is essentially the process of analyzing and determining the possible effects that events (such as a sudden economic downturn) might have on a bank, its loan portfolio, and its earnings and capital. Dodd-Frank required that banks with assets greater than $10 billion engage in comprehensive stress testing at least annually pursuant to regulatory guidance issued earlier this year. The Guidance makes clear that the OCC expects community banks to follow suit, although under somewhat less rigorous standards.
On October 12, 2012, the Maine Bureau of Financial Institutions issued notice that it has proposed a complete repeal and replacement of Regulation 28: Loans to One Borrower Limitations. Regulation 28 establishes certain lending limits for Maine-chartered financial institutions. The purpose of the new Regulation is to establish guidelines for determining credit exposure from derivative transactions in connection with loans. Derivative transactions can include swaps, loans, options and other financial agreements, and are an important tool in managing the risks underlying financial transactions. Beginning in January of 2013, the Dodd-Frank Act will prohibit state-charted financial institutions from engaging in derivative transactions unless state law requires them to identify and manage credit risks associated with derivative transactions. The proposed Regulation 28 implements various methods for financial institutions to use in considering these risks, adopting a number of methodologies used in the OCC’s new interim final rule for national banks.
The Bureau anticipates that it may amend the proposed Regulation 28 before it becomes final, to incorporate future amendments to the OCC’s rule. The deadline for public comment on the new regulation is November 19, 2012.