To the Chief Executive Officers of All State Member Banks, State-Licensed Branches and Agencies of Foreign Banks, Bank Holding Companies, and Edge and Agreement Corporations in the Second Federal Reserve District:
In a press release dated April 9, 2001, the federal banking agencies issued guidance concerning sound risk management practices for institutions engaged in leveraged financing, which has been an important financing vehicle for mergers and acquisitions, and business recapitalizations and expansions. The guidance augments previously issued statements on sound credit risk management (see our Circulars No. 11191, dated October 11, 1999, and No. 11066, dated July 6, 1998).
As applied to banking organizations under the supervision of the Federal Reserve, the new guidance on leveraged financing (pdf - 41kb) is attached to the Federal Reserve Board's supervisory letter (SR 01-9) of April 17, 2001.
Questions may be directed to your institution's relationship specialist (pdf - 35kb) at this Bank.