USA Law and Practice Contributed by: Michael Chernick, Sara Coelho, John Chua and Josh Tryon, A&O Shearman
Also, foreign banking institutions are required to seek approval from the OCC or state banking supervisor to establish US branches and agencies. In 2019, the Federal Reserve finalised new regulatory requirements for US subsidiaries of foreign banks. These provided relaxed capital and stress-testing requirements, while also imposing stricter liquidity requirements. 3.2 Restrictions on Foreign Lenders Receiving Security Under US law, regulations for foreign lenders related to granting security interests to, or providing guaran- ties in favour of, foreign lenders generally do not differ from regulations that apply to domestic lenders. 3.3 Restrictions and Controls on Foreign Currency Exchange The USA does not currently impose any foreign cur- rency exchange controls affecting the US loan mar- ket, unless a party is in a country that is subject to sanctions enforced by the Office of Foreign Assets Control (OFAC) of the US Department of the Treasury. OFAC administers and enforces economic and trade sanctions based on US foreign policy and national security goals. As of 2025, this framework remains unchanged; how- ever, heightened geopolitical tensions and the poten- tial for expanded sanctions regimes – particularly in response to ongoing global conflicts and shifting US foreign policy priorities – have led market participants to pay closer attention to OFAC developments. Lend- ers and borrowers are placing greater emphasis on compliance procedures and due diligence to ensure adherence to evolving sanctions lists, as enforcement activity and regulatory expectations continue to rise. 3.4 Restrictions on the Borrower’s Use of Proceeds Loan agreements in the USA traditionally have nega- tive covenants limiting the borrower’s use of loan pro- ceeds to specified purposes as set forth in the loan agreement. Furthermore, US law restricts the use of loan proceeds that are in violation of the margin-lending rules under
Regulations T, U and X, which limit financings used to acquire or maintain certain types of publicly traded securities and other “margin” instruments if the loans are also secured by such securities or instruments. 3.5 Agent and Trust Concepts In US syndicated loan financings, an administrative agent is appointed to act on behalf of the lending syn- dicate to administer the loan. Further, in some secured transactions, a separate and distinct collateral agent is appointed to coordinate collateral-related matters. When financings involve numerous series of debt securities or multiple lending groups sharing the same collateral, security interests are sometimes granted to collateral trustees or other “intercreditor” agents to act on behalf of all creditors, with the trust or intercredi- tor arrangements setting out the relative rights of the various creditor groups. 3.6 Loan Transfer Mechanisms In the US loan market, lenders can transfer their inter- est under credit facilities to other market participants through assignments or participations. An assignment is the sale of all or part of a lender’s rights and obli- gations under a loan agreement, with the assignee replacing the assigning lender for the portion of com- mitments or loans assigned. As the new “lender of record”, the assignee benefits from all rights and rem- edies available to lenders thereunder and takes on the obligations of the lenders. Assignments usually require the consent of the bor- rower, the administrative agent and – in the case of letter of credit and/or swingline subfacilities – the let- ter of credit issuers and the swingline banks. Loan agreements commonly provide for some limitations on borrowers’ consent rights during the continuation of any event of default – or, increasingly, only during the continuation of a payment or bankruptcy event of default. Borrower consent is usually not required for assign- ments to another existing lender (or its affiliate or “approved fund”). Where borrower consent is required, a negative consent mechanism is common: if the bor- rower does not object within a set period (usually 5 to 15 business days), consent to assignment is deemed given. In some instances, this deemed consent only
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