In March 2013, U.S. bank regulators issued joint supervisory guidance on leveraged lending to prevent a return of pre-2008-style underwriting excesses, with examiners informally anchoring scrutiny around a roughly six-times-EBITDA leverage benchmark. Over the next decade, banks' pullback shifted riskier deal finance toward private-credit funds, CLOs, and other nonbanks—expanding an opaque "shadow banking" ecosystem even as regulators maintained the guidance was supervisory, not a binding rule.
Since the OCC–FDIC rescission on December 5, 2025, officials have said the rollback is part of a broader push toward principles-based supervision. Acting FDIC Chair Travis Hill cited it in a December 11 FSOC statement alongside other supervisory-reform initiatives. Treasury Secretary Scott Bessent, FSOC's chair, has called for a reevaluation of FSOC's post-crisis approach in the name of reducing regulatory burdens.
Sen. Elizabeth Warren criticized that push, and lawmakers are pressing for stress testing and tighter monitoring of bank–private-credit linkages. The Federal Reserve has not publicly joined the OCC–FDIC rescission. The question is whether the Fed aligns its supervisory posture and how regulators respond to Warren and Reed's December 19 deadline.
Supervisors treated loans above roughly six times EBITDA as needing heightened scrutiny, effectively discouraging many such deals at regulated banks.
$1.5 trillion
Size of U.S. leveraged-loan market (2025)
Estimated market value of U.S. leveraged loans, now comparable to the U.S. high-yield bond market.
$2.1 trillion
Global private-credit AUM (2023)
Private credit assets roughly quadrupled over a decade, reaching about $2.1 trillion and rivaling leveraged loans and high-yield bonds in scale.
$1.2 trillion / $300 billion
Bank lending to nonbanks / to private-credit funds
Senators cite roughly $1.2 trillion in bank loans to nonbank financials, including about $300 billion to private-credit funds, as a growing systemic link.
14 events
Latest: December 12th, 2025 · 5 months ago
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December 2025
Treasury Secretary Bessent calls for reevaluating FSOC’s post-crisis approach
LatestPolitical Response
Treasury Secretary Scott Bessent, chair of FSOC, issued a public letter urging a rethink of FSOC’s role and the broader post-crisis regulatory framework, arguing rules have become excessive or duplicative—prompting pushback from Sen. Elizabeth Warren.
Hill spotlights leveraged-lending rollback in FSOC update on supervisory reforms
Political/Regulatory Signal
In a statement at an FSOC meeting, Acting FDIC Chair Travis Hill cited the OCC–FDIC withdrawal from the 2013 leveraged-lending guidance as one of several recent steps to reform supervision and boost bank lending under principles-based standards.
OCC and FDIC rescind 2013 leveraged-lending guidance
Regulatory Action
The OCC and FDIC jointly announce that they are rescinding the 2013 Interagency Guidance on Leveraged Lending and the 2014 FAQs, as well as prior communications transmitting those documents. They argue the guidance was overly restrictive, captured some investment-grade borrowers, and shifted leveraged-lending market share from regulated banks to nonbanks, and note GAO’s finding that the guidance was a CRA ‘rule’ never submitted to Congress. Banks are told to rely on eight general principles for safe and sound leveraged lending tied to existing credit-risk standards.
Senators warn on private-credit and bank–nonbank risks
Political Response
On the same day as the OCC–FDIC rollback, Senators Elizabeth Warren and Jack Reed send a letter to the Fed, FDIC, and OCC calling for a private-credit stress test and a supervisory review of banks’ exposures to nonbank lenders. Citing recent losses and about $1.2 trillion in loans to nonbank financial institutions, they urge stronger safeguards, including consideration of a countercyclical capital buffer.
November 2025
Agencies ease leverage capital standards for big banks
Regulatory Action
The Fed, FDIC, and OCC finalize a rule modifying the enhanced supplementary leverage ratio for the largest banks to function more as a backstop to risk-based capital requirements and to reduce disincentives for low-risk activities such as Treasury market intermediation, part of a broader deregulatory tilt.
June 2025
Leveraged-loan market rebounds to record size
Market Development
S&P Dow Jones Indices reports that the U.S. leveraged-loan market has reached about $1.5 trillion in market value, rivaling the U.S. high-yield bond market, with record quarterly trading volumes. The resurgence underscores the continued centrality of leveraged lending to corporate finance even before formal rule changes.
2023-20
Private credit matches leveraged loans and high-yield bonds in scale
Market Development
Global private-credit assets under management climb to around $2.1 trillion by 2023, roughly matching the size of the U.S. leveraged-loan and high-yield bond markets. Analysts and central banks note that post-crisis bank regulation and supervisory guidance, including on leveraged lending, helped drive more risky corporate credit into nonbank channels.
January 2021
Role-of-guidance rule codified
Regulatory Policy
Financial regulators finalize a rule codifying that supervisory guidance does not create binding legal obligations, replacing the 2018 statement. Industry groups had petitioned for this change after cases like the leveraged-lending guidance, where they argued supervisors treated guidance as enforceable rules.
September 2018
Agencies reaffirm supervisory guidance is not binding law
Regulatory Policy
Five federal agencies, including the Fed, FDIC, and OCC, issue an Interagency Statement on the Role of Supervisory Guidance, making clear that guidance does not have the force and effect of law and that enforcement actions will not be based on noncompliance with guidance. This is partly a response to concerns over leveraged-lending and other supervisory practices.
October 2017
GAO deems leveraged-lending guidance a ‘rule’ under Congressional Review Act
Legal/Procedural
In response to a request from Senator Pat Toomey, the Government Accountability Office rules that the 2013 Interagency Guidance on Leveraged Lending is a ‘rule’ under the Congressional Review Act and therefore should have been submitted to Congress and GAO before taking effect. The guidance was never submitted, undermining its formal legal footing.
November 2014
FAQs clarify supervisors’ expectations
Regulatory Action
The agencies release Frequently Asked Questions on the 2013 leveraged-lending guidance, elaborating how banks should define leveraged loans, structure underwriting standards, and manage pipeline risk. Market participants interpret the combination of guidance and FAQs as de facto rules, particularly around the six-times-EBITDA benchmark.
2013-20
Banks pull back as private credit surges
Market Reaction
Following the guidance, large banks increasingly avoid underwriting the riskiest leveraged loans or those that would attract examiner criticism, especially above six times EBITDA. Private-credit funds, CLO managers, and other nonbank lenders step in, gaining market share in financing leveraged buyouts and dividend recapitalizations.
March 2013
Post-crisis Interagency Guidance on Leveraged Lending
Regulatory Action
OCC, the Federal Reserve, and FDIC publish the Interagency Guidance on Leveraged Lending, replacing the 2001 guidance. The document tightens expectations for underwriting, repayment capacity, and risk management of highly leveraged corporate loans, with examiners informally focusing on deals with leverage above roughly six times EBITDA.
April 2001
First modern interagency leveraged-finance guidance
Regulatory Action
OCC, Federal Reserve, and FDIC issue guidance on leveraged financing, seeking to improve risk management as leveraged loans and LBO activity grow. This 2001 framework later becomes the foundation for stricter post-crisis rules.
Historical Context
3 moments from history that rhyme with this story — and how they unfolded.
1 of 3
2003–2009
Pre-2008 Leveraged Finance and the Global Financial Crisis
In the years before 2008, banks aggressively expanded leveraged lending, high-yield bond issuance, and securitization, including covenant-lite loans and complex structured products. Lax underwriting and light-touch regulation contributed to a broad credit bubble, particularly in subprime mortgages and leveraged structured products. When housing prices fell and defaults rose, losses spread through the banking system and shadow banking, leading to the collapse or rescue of major institutions and prompting post-crisis reforms such as Dodd-Frank and tougher supervisory expectations on leveraged lending.
Then
The crisis caused severe market dislocation, the failure or bailout of major financial institutions, and deep recessions worldwide, forcing extraordinary central-bank interventions and government rescue programs.
Now
Regulators tightened capital and liquidity standards, enhanced stress testing, and introduced new tools like the Volcker Rule. Supervisors also issued targeted guidance, including the 2013 leveraged-lending guidance, to prevent a repeat of pre-crisis excesses, though these measures later faced pushback for driving risk into nonbanks.
Why this matters now
The 2013 leveraged-lending guidance was a direct post-crisis response to perceived excesses in pre-2008 leveraged finance. Rolling back that guidance raises questions about whether market discipline and general safety-and-soundness standards alone can prevent a similar buildup of risky corporate leverage.
2 of 3
Late 1970s–1990s
The U.S. Savings and Loan Crisis and Deregulation of the 1980s
Savings and loan associations, traditionally conservative mortgage lenders, were hit by interest-rate shocks and then deregulated through laws such as the Depository Institutions Deregulation and Monetary Control Act of 1980 and the Garn–St. Germain Depository Institutions Act of 1982. These reforms expanded S&Ls’ powers to make commercial and real-estate loans without commensurate supervisory capacity. Many thrifts took on high-risk assets in a bid to ‘gamble for resurrection.’ When those bets failed, roughly a third of S&Ls collapsed, costing taxpayers on the order of $120–160 billion and leading to a sweeping regulatory overhaul under FIRREA.
Then
Hundreds of S&Ls failed, the FSLIC insurance fund became insolvent, and the Resolution Trust Corporation was created to resolve failed institutions and dispose of their assets.
Now
The crisis prompted tighter supervision, higher capital standards, and consolidation in the thrift industry, as well as debate over how deregulation without strong oversight can fuel moral hazard and systemic losses.
Why this matters now
The S&L episode illustrates how loosening constraints on leveraged, specialized lenders without robust, enforceable risk controls can generate a rapid buildup of bad assets and large public costs. It offers a cautionary parallel as regulators loosen informal constraints on leveraged corporate lending while relying on principles-based supervision.
3 of 3
2000–2008
Commodity Futures Modernization Act and OTC Derivatives Deregulation
The Commodity Futures Modernization Act of 2000 effectively exempted most over-the-counter derivatives, including credit default swaps, from comprehensive regulation. Large banks and nonbanks expanded derivatives dealing and risk-transfer activities in lightly supervised markets. These instruments amplified leverage and interconnectedness in the financial system and played a central role in the unraveling of structured-credit products during the 2008 crisis.
Then
OTC derivatives markets grew rapidly with little transparency, contributing to the sudden collapse of institutions like AIG and amplifying systemic panic when counterparties lost confidence.
Now
Post-crisis reforms brought derivatives onto central clearinghouses, imposed margin requirements, and increased transparency, but debates continue about whether the earlier deregulatory choices enabled excessive complexity and hidden leverage.
Why this matters now
The CFMA’s experience shows how pushing risk into lightly regulated markets can obscure vulnerabilities until a crisis hits. The migration of leveraged lending from banks to private-credit funds and CLOs after 2013 is a similar case of regulatory arbitrage; today’s rollback raises the question of whether risk is better managed inside tightly supervised banks or dispersed in shadow banking.
