OCC and FDIC Withdraw Leveraged Lending Guidance: What Changes Now

In late 2025, U.S. banking regulators took a meaningful step that may reshape how leveraged finance is supervised. The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) jointly announced the withdrawal of their interagency guidance on leveraged lending, originally issued in 2013 and later clarified through FAQs in 2014.

For more than a decade, this guidance played a central role in shaping examiner expectations and bank behavior, even though it was never formal regulation. Its removal, therefore, goes beyond a technical adjustment and reflects a broader shift in supervisory thinking.

This article clarifies why the guidance was withdrawn, what replaces it, and how banks and the leveraged lending market are likely to adjust. 

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What Was the Interagency Leveraged Lending Guidance?

The interagency leveraged lending guidance was intended to promote safe and sound practices for loans to highly leveraged or non-investment-grade borrowers, particularly in transactions such as leveraged buyouts, acquisitions, and recapitalizations.

While framed as supervisory guidance, it effectively became a benchmark for underwriting standards, borrower leverage tolerance, repayment expectations, and portfolio oversight. Over time, many banks treated it as a quasi-rulebook, designing transactions as much around supervisory acceptability as around credit fundamentals.

Why Did the OCC and FDIC Withdraw the Leveraged Lending Guidance?

In their joint statement, the OCC and FDIC outline several reasons for rescinding the guidance, while the Federal Reserve has not yet taken a similar step—a relevant distinction, as banks supervised by the Fed remain subject to the existing framework, representing the largest share of the U.S. banking system and creating potentially different supervisory regimes for large and smaller institutions.

At a supervisory level, regulators concluded that the guidance had become overly restrictive, limiting banks’ ability to apply general, principles-based risk management tailored to their specific business models. Rather than supporting judgment, it often constrained it.

They also acknowledged market consequences. By raising supervisory friction for banks, the guidance arguably pushed leveraged lending activity toward nonbank lenders, moving risk outside the regulated banking system rather than reducing it overall.

In addition, the agencies recognized that the guidance had become too broad in scope, capturing transactions that were not originally intended to fall under leveraged lending supervision, including certain loans to investment-grade companies.

Finally, there was a procedural and legal issue. A determination by the Government Accountability Office concluded that the 2013 guidance qualified as a “rule” under the Congressional Review Act and therefore should have been submitted to Congress, something that never occurred.

What Replaces the 2013 Leveraged Lending Guidance?

The withdrawal does not signal that leveraged lending is now viewed as low risk or lightly supervised. The message from regulators is more nuanced: leveraged lending remains risky, and examiners will continue to focus on it, but without the old playbook.

Instead, banks are expected to rely on general safety-and-soundness principles applicable to all commercial credit activities. In practical terms, this means:

• Managing core risks—especially credit and liquidity—and tailoring controls to the level of leveraged exposure

• Defining a clear risk appetite and ensuring leveraged lending fits within it

• Maintaining oversight across the entire loan pipeline, including loans held on the balance sheet and those intended for distribution

• Adopting a consistent internal definition of leveraged lending to monitor concentrations, including indirect exposures

• Ensuring underwriting reflects the loan’s purpose, repayment sources, and a realistic path to deleveraging 

For the balance sheet dimensions of these requirements —managing credit concentrations, liquidity impact, and funding exposure from leveraged lending portfolios— Mirai ALM & Liquidity provides the scenario analysis and stress testing capabilities to assess how leveraged exposures interact with the institution's overall liquidity and interest rate risk position." 

Examiners will still review underwriting quality, risk ratings, and reserves, but under broader, more flexible principles that take into account the bank’s size, complexity, and overall risk profile. Regulators also note that any future leveraged lending guidance would be issued through a notice-and-comment process, rather than informal supervisory issuances.

An Important Scope Note: Where the Federal Reserve Fits In

The original 2013 guidance was truly interagency, involving the OCC, FDIC, and the Federal Reserve. The December 2025 statement, however, applies only to the OCC and FDIC.

The Federal Reserve’s supervisory letter (SR 13-3), which reflects the interagency guidance, remains in place, and no parallel withdrawal has been announced. As a result, supervisory expectations may continue to differ depending on a bank’s primary regulator.

Practical Implications for Banks and the Market

From a practical standpoint, the withdrawal of the guidance is expected to give banks greater structural and commercial flexibility, particularly in how leveraged loans are underwritten, structured, and monitored. The removal of bright-line supervisory benchmarks—such as implicit leverage thresholds or standardized repayment expectations—reduces the risk that individual transactions will be criticized simply for failing to align with legacy metrics.

However, the overall impact of this shift should be viewed in context. The Federal Reserve has not announced a corresponding withdrawal, which is highly relevant given that Fed-supervised institutions represent the largest share of the U.S. banking system. As a result, the intended re-opening of space for bank participation in leveraged lending may be more limited than it appears, with flexibility applying unevenly across the sector and creating materially different supervisory frameworks for large, Fed-supervised banks and smaller institutions regulated by the OCC and FDIC.

That said, supervisory expectations have not diminished. Banks will still be required to demonstrate that their underwriting decisions are well-reasoned, consistent with their stated risk appetite, and supported by robust governance, including effective credit approval processes, portfolio monitoring, and escalation mechanisms when risks increase.

At the market level, regulators and observers suggest that this shift could rebalance competition between banks and private credit or other nonbank lenders. Over time, greater supervisory flexibility may allow banks to participate more actively in segments of the leveraged lending market they had previously exited, potentially bringing a portion of that activity back into the regulated banking system, where risks are subject to ongoing prudential oversight rather than migrating entirely to less regulated channels.

A Different Way to Supervise: Not a Reduction in Oversight

The OCC and FDIC’s decision to withdraw the leveraged lending guidance reflects a recalibration of supervisory approach rather than a rollback of oversight. By moving away from a prescriptive framework, regulators are emphasizing judgment, proportionality, and institution-specific risk management.

For banks, the implication is straightforward: there is more room to operate, but less room to rely on check-the-box compliance. In the post-guidance environment, credibility with supervisors will depend on how clearly institutions can explain (and defend) their risk decisions within a broader safety-and-soundness framework. 

Key Takeaways

• The OCC and FDIC have withdrawn the 2013 leveraged lending guidance.
• The Federal Reserve has not withdrawn its supervisory framework.
• Banks remain subject to robust supervisory scrutiny.
• Risk appetite, governance, underwriting quality, and portfolio oversight become even more important.
• Principles-based supervision requires institutions to clearly demonstrate sound risk management rather than compliance with predefined thresholds.

 Mirai ALM & Liquidity gives treasury and risk teams the scenario analysis and stress testing capabilities to assess how leveraged lending exposures interact with liquidity positions, funding gaps, and overall balance sheet risk —supporting the institution-specific, judgment-based risk management that the post-guidance supervisory environment now expects. Book a Demo → 

FAQ

• What changed when the OCC and FDIC withdrew the leveraged lending guidance?
  The OCC and FDIC withdrew the 2013 supervisory guidance and now expect banks to manage leveraged lending using general principles of safe and sound banking rather than a dedicated supervisory framework.

• Does the Federal Reserve still apply the leveraged lending guidance?
  Yes. At the time of writing, the Federal Reserve has not withdrawn Supervisory Letter SR 13-3, meaning supervisory expectations may differ depending on a bank's primary regulator.

• Does withdrawing the guidance mean leveraged lending is less regulated?
  No. Supervisors continue to review underwriting standards, governance, portfolio management, credit risk, and concentration risk. The regulatory approach has shifted from prescriptive guidance to principles-based supervision.

• How should banks adapt to the new supervisory approach?
  Banks should strengthen governance, clearly define their risk appetite, maintain robust portfolio monitoring, perform regular stress testing, and ensure underwriting decisions can be justified through comprehensive risk management processes rather than relying on historical supervisory thresholds.

• Why is integrated Balance Sheet Management important in this environment?
  As supervisory expectations increasingly emphasize governance, transparency, and institution-specific risk management, integrated Balance Sheet Management enables banks to connect treasury, ALM, liquidity, stress testing, and risk analytics within a single framework, making supervisory decisions more consistent, explainable, and auditable.
  

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