FR4203_20221109_omb

Supporting Statement for the
Recordkeeping Provisions Associated with Guidance on Leveraged Lending
(FR 4203; OMB No. 7100-0354)
Summary
The Board of Governors of the Federal Reserve System (Board), under authority
delegated by the Office of Management and Budget (OMB), has extended for three years,
without revision, the Recordkeeping Provisions Associated with Guidance on Leveraged
Lending (FR 4203; OMB No. 7100-0354). The Interagency Guidance on Leveraged Lending
(Guidance)1 outlines high-level principles related to safe-and-sound leveraged lending activities.
The Guidance includes a number of voluntary recordkeeping provisions that apply to financial
institutions that are engaged in leveraged lending activities and for which the Board is the
primary federal supervisor, including bank holding companies, savings and loan holding
companies, state member banks, and state-chartered branches and agencies of foreign banks that
engage in these activities.
The estimated total annual burden for the FR 4203 is 27,935 hours.
Background and Justification
The agencies issued the Guidance in 2013 to assist financial institutions in providing
leveraged lending to creditworthy borrowers in a safe-and-sound manner.2 The Guidance
outlines high-level principles related to safe-and-sound leveraged lending activities, including
underwriting considerations, assessing and documenting enterprise value, risk management
expectations for credits awaiting distribution, stress testing expectations and portfolio
management, and risk management expectations. The Guidance applies to all financial
institutions supervised by the Board that engage in leveraged lending activities.
Description of Information Collection
The FR 4203 covers all aspects of the Guidance that constitute an information collection;
generally, these are provisions that suggest financial institutions engage in recordkeeping. The
Guidance articulates expectations that, among other things, institutions should maintain:3
• a risk management framework that contains written risk objectives, risk acceptance
criteria, and risk controls,
• in the credit file for a leveraged loan, a chronological rationale for and analysis of all
substantive changes to the borrower’s operating plan and variance from expected
performance,
“Interagency Guidance on Leveraged Lending,” March 21, 2013, available at
https://www.federalreserve.gov/supervisionreg/srletters/sr1303a1.pdf. The Guidance was published jointly by the
Board, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation (the agencies).
2
The Guidance updated and replaced prior interagency guidance issued by the agencies and the Office of Thrift
Supervision in April 2001. See SR 13-3, “Interagency Guidance on Leveraged Lending,” March 13, 2013
(discussing the relationship between the Guidance and the prior interagency guidance).
3
Previous documentation for this information collection mistakenly truncated the list of recordkeeping provisions in
the Guidance.
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well-defined, written underwriting standards that, among other things, establish clear
underwriting limits, define acceptable leverage levels, and describe amortization
expectations for senior and subordinate debt,
valuation standards that include documenting assumptions underlying enterprise-value
estimates and conducting and documenting stress tests of enterprise values and their
underlying assumptions at origination of the transaction and periodically thereafter,
information about a deal sponsor, if any, that can document the sponsor’s history of
demonstrated support as well as the economic incentive, capacity, and stated intent to
continue to support the transaction,
sound management information systems that enable management to identify, aggregate,
and monitor leveraged exposures and comply with policy across all business lines,
strong pipeline management policies and procedures that, among other things, include
written policies and procedures for defining and managing distribution failures and
“hung” deals and discuss the financial institution’s appetite for underwriting risk ,
guidelines for conducting periodic portfolio and pipeline stress tests to quantify the
potential impact of economic and market conditions on the institution’s asset quality,
earnings, liquidity, and capital.

The Guidance does not contain any expectations regarding the manner in which records
should be kept (e.g., physical or electronic media), but the Board anticipates that most
respondents utilize information technology to reduce the burden of following the voluntary
recordkeeping.
Respondent Panel
The FR 4203 panel comprises all bank holding companies, savings and loan holding
companies, state member banks, and state-chartered branches and agencies of foreign banks that
engage in leveraged lending activities.
Many community banks are not subject to the Guidance because they do not engage in
leveraged lending. The limited number of community and smaller institutions that are involved
in leveraged lending activities may discuss with the Federal Reserve System whether and, if so,
how to implement these collections of information in a cost-effective manner that is appropriate
for the complexity of their exposures and activities.
Time Schedule for Information Collection
The documentation suggested by the Guidance is maintained by each institution;
therefore, the information is not collected or published by the Board. The Guidance does not
specify the frequency with which institutions should update these documents, but it does suggest
that institutions should occasionally review and revise relevant policies and procedures to ensure
leveraged lending activities are conducted in a safe-and-sound manner.
Public Availability of Data
There is no data related to this information collection available to the public.

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Legal Status
The recordkeeping provisions of the Guidance are authorized pursuant to sections 9(6),
25, and 25A of the Federal Reserve Act (12 U.S.C. §§ 324, 602, and 625, respectively.) for state
member banks, agreement corporations, and Edge corporations, respectively; section 5(c) of the
Bank Holding Company Act of 1956 (12 U.S.C. § 1844(c)) for bank holding companies; sections
10(b)(2) and 10(b)(3) of the Home Owners’ Loan Act (12 U.S.C. §§ 1467a(b)(2) and (b)(3)) for
savings and loan holding companies; and section 7(c)(2) of the International Banking Act of
1978 (12 U.S.C. § 3105(c)(2)) for state-licensed branches and agencies of foreign banks, other
than insured branches. The recordkeeping provisions contained in the FR 4203 are voluntary.
Because these records would be maintained at each banking organization, the Freedom of
Information Act (FOIA) would only be implicated if the Board obtained such records as part of
the examination or supervision of a banking organization. If the records were obtained by the
Board as part of an examination or supervision of a financial institution, this information may be
considered confidential pursuant to exemption 8 of the FOIA, which protects information
contained in “examination, operating, or condition reports” obtained in the bank supervisory
process (5 U.S.C. § 552(b)(8)). In addition, to the extent that information contained in these
records constitutes nonpublic commercial or financial information, which is both customarily
and actually treated as private by a banking organization, it may be kept confidential under
exemption 4 of the FOIA, which exempts “trade secrets and commercial or financial information
obtained from a person [that is] privileged or confidential” (5 U.S.C. § 552(b)(4)).
Consultation Outside of the Agency
There has been no consultation outside the Federal Reserve System with respect to the
proposed extension, without revision, of this collection.
Public Comments
On April 6, 2022, the Board published an initial notice in the Federal Register (87 FR
19933) requesting public comment for 60 days on the extension, without revision, of the
FR 4203. The comment period for this notice expired on June 6, 2022. The Board did not receive
any comments. The Board adopted the extension, without revision, of the FR 4203 as originally
proposed. On August 2, 2022, the Board published a final notice in the Federal Register (87 FR
47212).
Estimate of Respondent Burden
As shown in the table below, the estimated total annual burden for the FR 4203 is 27,935
hours. Because no information is submitted to the Board by firms in connection with the
leveraged lending guidance, the Board does not know precisely how many Board-supervised
institutions have implemented the recordkeeping provisions of the Guidance. However, based on
the information that is available, the Board estimates that approximately 37 Federal Reservesupervised institutions will implement the recordkeeping provisions of the Guidance. This is a
conservative estimate derived in part from the number of Federal Reserve-supervised institutions

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known to be engaged in certain types of leveraged lending. Specifically, the estimate is derived
from a count of 29 institutions currently engaged in shared national credits (SNCs), which are
credit exposures of $100 million or more that, at inception, are shared by three or more
supervised institutions. The SNC exposure for these institutions does not include exposure to
commercial real estate, insurance, or construction. Because the count of institutions engaged in
SNCs likely does not include all institutions that originate or participate in leveraged lending, the
Board has estimated that an additional 8 respondents (for a total of 37) will implement the
recordkeeping provisions in the guidance. The Board estimates that it would take the 37 Federal
Reserve-supervised institutions that are expected to follow these recordkeeping provisions on
average 755 hours to maintain the related records annually. These recordkeeping provisions
represent less than 1 percent of the Board’s total paperwork burden.

FR 4203
Maintain guidance provisions

Estimated
number of
respondents4

Estimated
annual
frequency

37

1

Estimated
Estimated
average hours annual burden
per response
hours
755

27,935

The estimated total annual cost to the public for the FR 4203 is $1,688,671.5
Sensitive Questions
This collection of information contains no questions of a sensitive nature, as defined by
OMB guidelines.
Estimate of Cost to the Federal Reserve System
Since the Guidance does not require the Federal Reserve System to collect any
information, the estimated cost to the Federal Reserve System is negligible.

4

Of these probable respondents, none are considered small entities as defined by the Small Business Administration
(i.e., entities with less than $750 million in total assets), https://www.sba.gov/document/support-table-sizestandards.
5
Total cost to the public was estimated using the following formula: percent of staff time, multiplied by annual
burden hours, multiplied by hourly rates (30% Office & Administrative Support at $21, 45% Financial Managers at
$74, 15% Lawyers at $71, and 10% Chief Executives at $102). Hourly rates for each occupational group are the
(rounded) mean hourly wages from the Bureau of Labor Statistics (BLS), Occupational Employment and Wages,
May 2021, published March 31, 2022, https://www.bls.gov/news.release/ocwage.t01.htm. Occupations are defined
using the BLS Standard Occupational Classification System, https://www.bls.gov/soc/.

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