Leverage test/leverage ratio meaning

In this issue: UK, EU and international regulators and bodies Prudential requirements Operational resilience Financial crime and sanctions Complaints, compensation and claims management Investigations, enforcement and discipline Regulation of derivatives Sustainable finance and ESG Banks and mutuals UK MiFID II Consumer credit, mortgage and home finance Regulation of insurance Payment services and systems Fintech and cryptoassets Dates for your diary Financial Services Enforcement Database New and updated content Daily and weekly news alerts Intraday news alerts LexTalk®Financial Services: a Lexis®Nexis community UK, EU and international regulators and bodies FSCS confirms unchanged levy for 2025/26 and provides early forecast for 2026/27 The Financial Services Compensation Scheme (FSCS) has issued its latest Outlook levy update for 2025/26, stating the levy will hold at £356m—as projected in May 2025—with no further levy anticipated for firms across the rest of this financial year. A preliminary view for...

In this issue: UK, EU and International Regulators and Bodies Authorisation, Approval and Supervision Prudential Requirements Financial Crime and Sanctions Regulation of Capital Markets Regulation of Derivatives Sustainable Finance and ESG Banks and Mutuals Investment Funds and Asset Management UK MiFID II Regulation of Insurance FSMA Regulated Pensions Activity Payment Services and Systems Fintech and Cryptoassets Regulation of AI in FS Dates for your diary LexTalk® Financial Services: a Lexis®Nexis community UK, EU and International Regulators and Bodies FCA’s regulatory plans point to cautious optimism The Financial Conduct Authority’s 2025–2030 strategy, published on 25 March 2025, sets out four core priorities: combating financial crime supporting consumers encouraging growth becoming a smarter regulator Firms that look more closely will notice some less expected but reassuring signals: a commitment to a more adaptable supervisory approach for the largest firms,...

This glossary sets out many of the expressions commonly used in the leveraged finance market. Words appearing in the definitions in bold are defined elsewhere in this glossary. For further banking terminology, please refer to the main Banking & Finance Glossary... Acquisition finance glossary—A Acceleration Acceleration is the formal action taken by the agent, on the instructions of the majority lenders, following an event of default, such as making a demand for early repayment of the loan. See Practice Note: Accelerating a loan for more information... Accordion feature/accordion facility An accordion, also called an incremental debt feature, is a mechanism in the facilities agreement that, provided specified conditions are satisfied (for example, pro forma compliance with a leverage test), permits those lenders under the facilities agreement who wish to do so to advance additional debt. The terms for that extra debt are typically captured in an increase notice. This accordion or incremental debt flexibility is different from structural adjustment, which usually requires the majority consent...

Banking & Finance glossary A Auditing and Accounting Organisation for Islamic Financial Institutions (AAOIFI) The foremost Islamic, international, autonomous, independent, not-for-profit corporate body that develops and issues accounting, auditing, governance, ethics and Shari’ah benchmarks and standards for Islamic Financial Institutions (IFIs) and the wider Islamic finance sector. Founded in Bahrain in 1991, it is backed by a number of institutional members across more than 45 countries, including central banks and regulatory authorities, financial institutions, accounting and auditing practices, and legal firms. Its pronouncements are currently applied by leading Islamic financial institutions across the world and have advanced a progressive and gradual harmonisation of global Islamic finance practice. It also delivers professional qualification programmes—notably Certified Islamic Professional Accountant (CIPA), Certified Shari’ah Adviser and Auditor (CSAA), and the corporate compliance programme—in efforts to strengthen the industry’s human capital and governance frameworks. For further details, see Practice Note: Key participants in the Islamic finance industry—Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). Acceleration Acceleration is the formal action...

This Practice Note serves as a primer on financial covenants (financial undertakings). It outlines the rationale for using financial covenants, then describes how they are established and measured. It also covers the typical financial covenants seen in commercial finance, such as: minimum net worth test gearing ratio leverage ratio (or debt to equity ratio) current ratio (or acid test ratio) cashflow ratio interest cover ratio loan to value ratio Note that this Practice Note does not delve into financial covenants for specialist transactions in detail. The final section, however, signposts additional resources on applying financial covenants across various specialist transactions. Where relevant, it draws attention to provisions in the Loan Market Association (LMA) senior multi-currency compounded rates/term rates term and revolving facilities agreement for leveraged acquisition finance transactions (the LMA leveraged facilities agreement) (available to LMA members on the LMA website). Note also that the LMA investment grade facility documentation omits financial covenants because they are considered too...