Large Bank Supervision Forum 2023

Regulatory Milestones and Consequential Bank Regulation

2010 – Today. Mature Asset Class. Evolution and Growth of Primary and Secondary Markets  Efficiency and Liquidity, Transparency and Reporting. Enhanced Portfolio Management. Disruption from pandemic and monetary policy moves. Market has adjusted to elements of the Dodd Frank Act

1980’s High Yield Bond volume peaked to support LBO activity. Syndicated Loan Market Emerges. First retail Mutual Fund

2000’s “Loan Traders” emerge and LSTA S&P Index supports efficient trading of higher volumes . Growth of Enterprise Value in bankruptcy. Global growth

1990’s Loan Syndication and Trading Association (LSTA) formed. Ratings and coverage begin. “B” or Institutional Term Loans popularized. Secondary market, CLOs, 2 nd lien loans and securitization emerge.

1977 Interagency Shared National Credit (SNC) Program Established. REGULATION INNOVATION

2010 The Dodd ‐ Frank Wall Street Reform and Consumer Protection Act and revisions

1981* OCC Bankng Circular 181, Purchase of Loans in Whole or In Part ‐ Participations.

1988 Examining Circular 245, “Highly Leveraged Transactions” published.

2013 ‐ 14 2013

2001 OCC Bulletin 2001 ‐ 18 “Leveraged Financing–Sound Risk Management Practices”

2020 OCC Bulletin 2020 ‐ 81 Credit Risk Management of Loan Purchase Activities

2008 OCC

Interagency Guidance on Leveraged Lending and 2014 FAQ for Implementing the Guidance.

Publishes Leveraged Lending – Comptrollers Handbook

For financial professional or qualified institutional investor use only. Not for inspection by, distribution or quotation to the general public.

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*Revised 10-30-2013

Banks Today – Leveraged Lending Activities

Money Centers / Large Regional  Have in-house syndicated loan groups  Continuous pressure to manage concentrations Large Community and Mid-Regional  Limited direct access to syndicated loan market  Often, limited resources to thoroughly assess and manage this risk  Opportunity is available to enter the market and gather needed resources Community Banks  Size and human resources may inhibit active participation in Leveraged Lending.  Predominantly funding through participations

DOMINANT ACTIVE DOMINANT

ACTIVE OR EXPLORING

SELECT GUARDED

For financial professional or qualified institutional investor use only. Not for inspection by, distribution or quotation to the general public.

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