LONDON Dec 13 Loan bankers are meeting the
European Central Bank on Friday to discuss proposed leveraged
lending guidelines as concerns mount that the rules could have a
greater impact in Europe where banks play a more prominent role
as investors and hold more exposure on their balance sheets.
The ECB is conducting a consultation process and has asked
for comments by January 27, after unveiling draft guidelines in
November that mirror existing US rules.
The US introduced leveraged lending guidelines in 2013 to
reduce systemic risk and encourage banks to maintain credit
standards by clamping down on risky loans that lenders have
underwritten but may not be able to sell.
European bankers are concerned that the guidelines will
stretch beyond buyout loans for private equity-owned companies
and that corporate, investment-grade, commercial real estate,
infrastructure and utility loans could also be caught by the new
"It is a much broader remit than originally expected. If
they are targeting sponsor business then they have gone a very
broad way to get there," a senior leveraged finance banker said.
Bankers are unclear whether infrastructure loans to rated
and regulated companies, such as Thames Water, will fall under
the new guidelines. Infrastructure lending was previously a
lucrative business and European banks have high levels of
Many of these infrastructure loans are also for British
companies, which may be regulated by the Bank of England after
Britain's vote to leave the European Union and are strategically
important for the British government.
"The ECB needs to be clear on what it is catching and banks
need to try to work out how to prevent the guidelines from
ending good business. The ECB should not stop us from lending to
utilities and infrastructure and other deals that make sense,
which the British government would want us to do," the banker
Banks are also concerned about how they will organise
themselves internally in time, to assess which loans could be
affected, and how they will be accounted for and reported on, as
the logistical challenge mounts for lenders.
"It will take a lot of resources, time and effort to get
everything sorted and make sure we work out exactly what needs
to be reported on. We are already dealing with a lot more
bureaucracy and this will just add to it," a second senior
There are 127 banks in the Single Supervisory Mechanism that
is regulated by the ECB. Banks operate different internal
models, which could also give a less uniform application of the
guidelines than expected, bankers said previously.
(Editing by Tessa Walsh and Christopher Mangham)