On December 3rd, the OCC and FDIC announced they were withdrawing the Leveraged Lending Guidance they (with the Fed) had instituted in 2013. This guidance had been an outgrowth of the GFC which created widespread devaluation of bank balance sheets globally.
Though the proximal cause of the downturn was poor sub-prime mortgage underwriting that spread like wildfire through the banking system, regulators had long identified “risky loans,” i.e. loans with high leverage used in financing private equity buyouts, as a similar threat that needed additional supervision and oversight to protect from systemic risk.
At once controversial, this guidance was softened in 2014 by a list of FAQs that attempted to demonstrate how the new framework would be implemented and what it covered. Then in 2018, under pressure from the Trump Administration, the agencies issued a clarification, saying “guidance” didn’t imply “regulation,” which would have to be approved by Congress.