Jump to content
House Price Crash Forum
Sign in to follow this  
interestrateripoff

Us - Banks Search For Loopholes In Leveraged Loan Guidelines

Recommended Posts

http://uk.reuters.com/article/2014/06/10/uk-banks-regulations-insight-idUKKBN0EL08E20140610

Wall Street banks are playing cat-and-mouse with U.S. regulators over rules that seek to reduce lending for deals that load up companies with too much debt, as they try to retain a profitable business and meet demands from clients and investors.

Leveraged lending is one of the most lucrative forms of loans for banks, giving Wall Street an incentive to accommodate borrowers as much as it can. Banks fees on U.S. junk-rated loans stand at $4.9 billion so far this year, a year-to-date record and up 10 percent from the same period last year, according to Thomson Reuters and Freeman Consulting data.

The guidelines, issued by the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp in March last year, generally seek to restrict banks making loans in deals such as leveraged buyouts that would leave a company with debt levels that are more than six times its annual cash flow. Since the guidelines were issued, regulators have warned lending standards have in fact deteriorated.

As a result, banks are exploring whether they can arrange more of special kinds of bonds for companies that should not be taking on more loans under the guidelines, according to banking sources who spoke on condition that neither they nor the banks they work for or with are identified. These bonds would help to split the overall debt load between a holding company and its operating subsidiary. The guidelines are aimed at curbing risky loans and do not directly address bonds.

"There are a lot of smart, creative people out there that are looking for ways to both meet demand from borrowers and investors and satisfy regulators," said David Brittenham, chair of law firm Debevoise & Plimpton LLP's finance group.

Surely this should read clever people seek ways to make bets and get a govt bailout when they go wrong. Private property should be confiscated from the individuals when these leverage deals go wrong. I wonder how clever they would want to be then?

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   204 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.