What's Next For The Leveraged Lending Guidance?

With the US Government Accountability Office's ("GAO's") letter ruling on Oct. 19, 2017 that the 2013 Interagency Guidance on Leveraged Lending (the "Leveraged Lending Guidance") constitutes a "rule" for purposes of the Congressional Review Act (the "CRA"), participants in the leveraged lending markets are inquiring as to what the current status of the Leveraged Lending Guidance is and what the likely procedural next steps under the CRA will be. Set forth below is discussion of these issues.

Is the Guidance Still Legally Binding?

The CRA provides that no rule can take effect unless the agency promulgating the rule submits a report (a "Rule Report") to the House, the Senate and the Comptroller General's Office containing the rule, a description thereof and a statement as to whether it is a "Major Rule." (A "Major Rule" is one that has had or would likely result in: an annual effect on the economy of $100 million or more; a major increase in costs or prices for consumers, individual industries, government agencies or regions; or a significant adverse effect on competition, employment, investment, productivity, innovation or the ability to compete with foreign-based enterprises). Prior to Oct. 19, 2017, no Rule Report had been submitted with respect to the Leveraged Lending Guidance. This might seem to be the end of the analysis, but it is not. In the past, the Senate has accepted the publication of GAO letter rulings in the Congressional Record as sufficient to initiate the period in which to introduce a joint resolution of disapproval in lieu of a conforming Rule Report. On Oct. 19, 2017, Sen. Patrick Toomey (R.PA.) directed that the GAO letter ruling be published in the Congressional Record.

The next issue that needs to be determined is whether the Leveraged Lending Guidance/rule is a "Major Rule". To our knowledge, no authority has publicly expressed a view on this. If it is a "Major Rule", the rule cannot become effective until, at the earliest, 60 days after the GAO letter ruling is published in the Congressional Record. If it is not a Major Rule, it would go into effect otherwise in accordance with its terms, and in the case of the Leverage Lending Guidance/rule, would simply continue to remain in effect.

The intricacies of the CRA are interpreted by Congress alone; the CRA states that: "[N]o determination, finding, action, or omission under this chapter shall be subject to judicial review."

The Senate staff we have spoken to are of the...

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