Executive Summary
NYSE regulators FDIC and OCC have withdrawn the 2013 leveraged-lending guidance, ending formal caps (notably a 6× debt/EBITDA limit) and restrictive venture lending standards, citing competitive disadvantage and excessive rigidity in past years. These changes are already effective and accompany additional easing of capital rules (e.g., community bank leverage ratios), but criticism warns of heightened default risk and systemic vulnerability. Strategic winners may include banks expanding into private-credit-dominated leveraged lending, though execution risks and oversight gaps remain the main concerns.
Analysis
On December 5, 2025, the U.S. Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) formally rescinded the 2013 leveraged-lending guidance, including its 2014 FAQs, as well as the OCC’s 2023 guidance related to venture loans. The withdrawal is immediate. Under this legacy framework, many banks had been limited by prescriptive metrics—such as a debt-to-EBITDA threshold of roughly six times—pushback that loans exceeding that cap required stricter repayment conditions. The guidance, though not law, had in practice served as a binding constraint enforced by regulatory examiners. FDIC and OCC argued that the guidance had become “overly restrictive” and had driven leveraged lending into lightly regulated private credit funds. [2],[8]
With the guidance gone, banks are now expected to manage leveraged and venture lending under more general safety-and-soundness principles, giving them more discretion. At the same time, capital relief is also being proposed elsewhere in the regulatory framework. For example, community banks are expected to see the Community Bank Leverage Ratio (CBLR) lowered from 9 % to 8 %, and the grace period for falling below this threshold extended—from two consecutive quarters to potentially four (i.e., up to a year), subject to supervisory oversight. [5],[9]
These regulatory shifts form part of a broader deregulatory wave under the current administration, including easing enhanced supplementary leverage ratio requirements for large and consolidated banks, reducing another layer of capital constraint over holding companies and their depository arms. [0],[1]
Strategic implications are multifaceted. Banks with strong risk infrastructure, but constrained by the previous rigid limits, may seize opportunities to re-enter or expand in leveraged lending and venture debt markets. They may capture market share from private credit funds, particularly if they can reprice risk, tighten credit underwriting, and monitor concentrations aggressively. On the flip side, these moves increase exposure to defaults—especially in leveraged borrowers—and as rising junk bond defaults are already reported, macro stress, interest rate risk, and stressed sectors (e.g. tech, startups) could amplify losses. Regulatory oversight will shift from quantitative thresholds to qualitative assessments; a weaker institutional culture or less granular early warning systems could lead to governance and risk control lapses. Policymakers and investors should ask critical questions: how will banks calibrate risk appetite; will rating agencies adjust; how will systemic stress be monitored; and are capital buffers and stress tests still sufficient to absorb potential losses?
Supporting Evidence
- The OCC and FDIC rescinded the “Interagency Guidance on Leveraged Lending” from 2013 and its FAQs, and rescinded OCC Bulletin 2023-34 on venture lending; they expect banks to use broader safe-and-sound lending principles going forward. [8]
- The 2013 guidance had discouraged loans with debt-to-EBITDA ratios over ~6× unless certain repayment terms were satisfied. [12],[8]
- Regulators said the framework had become “overly restrictive” and pushed leveraged lending activity into the non-bank private credit sector, reducing oversight. [12],[8]
- The change is seen as favorable for banks competing with private lenders and could pull more leveraged loans back under regulated banking. [12],[15]
- Community bank capital rules are being eased: CBLR lowered from 9 % to 8 % for opt-in banks, and the grace period for non-compliance is being extended to up to a year. [5],[9]
- The capital guideline change including leverage ratio relief reduces overall capital requirements for global banks by ~$13 billion (≈1.4 %), and by ~$213 billion (≈27 %) for their depository subsidiaries. [0],[1]
- Critics—including former examiners and some legislators—warn that relaxing these guardrails risks larger credit losses in future downturns, and could erode system resilience. [15],[4]
- Junk bond default rates have already climbed to a four-year high, raising concerns that loosening standards could exacerbate spillovers. [14]
Sources
- [1] www.reuters.com (Reuters) — 5 December 2025
- [2] www.ft.com (Financial Times) — 5 December 2025
- [3] www.wsj.com (The Wall Street Journal) — 5 December 2025
- [4] www.americanbanker.com (American Banker) — ~last week (Nov 2025)
- [5] www.bloomberg.com (Bloomberg) — 15 October 2025
- [6] www.pwc.com (PwC) — 5 December 2025
- [7] www.reuters.com (Reuters) — 2 December 2025