Loan Risk Management in 2025: What Recent Regulatory Shifts Mean for Banks and Investors

Loan risk management is back in the spotlight as banks and regulators recalibrate lending practices in response to new guidance from key regulatory bodies. In late 2025, the Office of the Comptroller of the Currency () and the Federal Deposit Insurance Corporation (FDIC) took major steps to loosen earlier restrictions on venture loans and leveraged lending. These moves signal a shift in how banks are expected to assess and manage risk, especially for high-growth or high-debt companies. For investors, this means greater access to financing for startups and emerging firms — but also more nuanced risks that need to be understood and tracked.

Recent regulatory shifts: OCC and FDIC reshape lending standards

On December 5, 2025, the OCC issued updated guidance for to companies at different stages of development — from early to late stage. The new bulletin clarifies that prudent venture lending is not discouraged, as long as banks follow consistent risk management practices like proper documentation, underwriting, risk ratings, and reserves. This replaces the previous 2023 guidance and offers a more flexible framework for banks willing to lend to innovative but high-risk businesses.

Around the same time, the OCC and FDIC also rescinded the 2013 Interagency Guidance on Leveraged Lending and the 2014 FAQs. Critics had long argued that those rules were too broad and restrictive, applying to some loans that weren’t intended to be covered — including loans to investment-grade companies. By stepping back, the agencies are allowing banks to rely on general principles of safe and sound lending, such as defining risk appetite and assessing borrower performance. The change is intended to foster more lending in the market while still maintaining accountability.

New opportunities and challenges for banks and nonbanks

The regulatory shift opens the door for banks to reenter the leveraged loan market more freely. However, it also introduces more risk, particularly with higher leverage and risk-sensitive borrower profiles according to analysis. Nonbanks, which had grown significantly in the leveraged loan space due to prior constraints, now face stronger competition. For investors, this means that the landscape for loan-backed assets may become more dynamic — with more deals being structured but also more scrutiny on creditworthiness.

Banks are also being encouraged to apply their own risk management frameworks more broadly, rather than relying on a rigid set of rules. This could lead to more tailored lending approaches, but also greater variability in how banks assess risk. For investors in bank stocks or loan funds, it’s important to understand how different institutions are adapting to these new standards and what their risk profiles look like.

AI and data are reshaping lending and risk management

is becoming a central force in financial markets, and its influence is especially strong in loan risk management. AI is being used to enhance , detect fraud, and improve underwriting decisions according to industry reports. Major financial institutions like JPMorgan Chase (NYSE: JPM) and Goldman Sachs (NYSE: GS) are investing heavily in AI-driven platforms to streamline lending and reduce risk exposure.

Data sharing is also playing a role in small business financing. In China, for instance, a tax-data sharing program for firms that authorized access to their tax information. This suggests that better access to data — whether from tax, credit, or operational systems — can lead to more accurate lending assessments and broader access to capital. For investors, this points to the growing importance of data analytics in credit markets.

What investors should watch for in 2026 and beyond

As we head into 2026, several factors will shape the loan risk landscape. First, banks will need to demonstrate they can manage risk effectively under the new guidelines. That means watching for any signs of overextension or poor underwriting. At the same time, nonbanks may continue to innovate in lending products, leveraging technology and alternative data sources to fill gaps left by traditional lenders.

Consumer affordability also remains a key concern. , could still weigh on borrowing power. For loan-backed investments, this means keeping an eye on borrower performance and repayment capacity.

In the long term, the integration of AI into lending and risk management is expected to continue. This could lead to more efficient credit assessments and better borrower outcomes — but also raises concerns about transparency and fairness in algorithmic decision-making.

At the end of the day, the evolving regulatory and technological landscape means that loan risk management is not static. Investors who follow these changes and understand how different institutions are adapting will be better positioned to navigate the opportunities and risks ahead.