How Regulatory Change Is Reshaping Global Lending

How are shifting capital and regulatory rules actually changing the way banks lend, borrowers negotiate, and lawyers structure deals?

That question opened the recent WLG Banking & Finance Group meeting, which brought together members from Europe, the Americas, and Asia to compare how Basel III "endgame" and related reforms are shaping real transactions across jurisdictions.

Matthieu Taillandier of Arendt & Medernach (Luxembourg) set the stage with an overview of the uneven and still-moving Basel III implementation timeline. In the EU, the Capital Requirements Regulation 3 is already in force, and the Capital Requirements Directive 6 is being transposed, with a target date in early 2027. The trajectory is clear: more regulation, deeper consumer-protection requirements, and higher capital and operational burdens on banks. Participants contrasted this with the United States, where active lobbying—particularly by regional and mid-sized banks—reflects concern that the current approach may tighten capital requirements in ways that hamper competitiveness, especially against the expanding private credit market. That divergence is already influencing lending appetite, deal terms, and pricing across borders.

From the Dominican Republic, Luis Pellerano of Pellerano Nadal described a system still working toward complete Basel III alignment, where monetary policy and banking regulation are closely intertwined with political priorities. Exchange-rate stability remains a central goal, and interest-rate moves tend to track the U.S. Federal Reserve with a persistent spread, keeping local borrowing costs higher. Borrowers with hard-currency revenues often seek dollar-denominated loans to avoid the risk of devaluation. Those operating purely in local currency face structurally higher financing costs. This also creates an opportunity for multilaterals such as the IFC, World Bank, and IDB, which can provide longer-term financing, although typically on slower timelines.

Jurisdictions differ in other pressure points as well. In China, Charles Chen of Zhong Lun Law Firm noted that banks remain heavily regulated and predominantly state-owned or state-controlled, with policy geared toward stability. Crypto is effectively walled off from the onshore financial system, as conversions between RMB and crypto and the provision of crypto-related banking services are prohibited, thereby pushing activity to offshore platforms operating in a gray area. 

In India, Hufriz Wadia of AZB & Partners reported that Basel III is fully integrated for commercial banks, while smaller institutions remain under the Basel II framework. The Reserve Bank of India maintains a conservative, protectionist approach—treating bank lending as the use of public money and restricting speculative equity-linked transactions. Those guardrails have limited onshore acquisition finance, even as foreign banks and non-bank finance companies have had more flexibility to participate.

These differences continue to influence pricing models, covenant structures, and capital allocation. Matthieu observed that banks are increasingly embedding regulatory capital costs directly into pricing and moving away from standardized covenants toward more tailored, scenario-sensitive frameworks. Banks are using covenants to account for multiple future regulatory paths and jurisdiction-specific risks. Meanwhile, private credit providers often take a more flexible approach—sometimes covenant-light, sometimes covenant-heavy, but generally more adaptable than regulated banks. The result is a dual-track market: bank financings with dense, bespoke covenant packages, and private credit deals that can offer either lighter terms or very structured arrangements depending on the strategy and risk appetite.

A recurring theme was the evolving role of lawyers in this environment. Luis emphasized that regulatory uncertainty is precisely when counsel add the most value—not only interpreting rules but bringing practical judgment, creativity, and cross-sector experience to help clients navigate risk allocation and negotiation dynamics. Matthieu added that clients are increasingly seeking a broader view of what the market is doing, including where other lenders are drawing the line, which covenants are becoming standard, and what strategies competitors are using.

Hufriz shared an example from aviation finance in India. The country's recent adoption of the Cape Town Convention should, in principle, make aircraft financing more predictable and accessible. Yet, past airline insolvencies and enforcement challenges mean that many lenders still view India as a difficult market. Borrowers and their lawyers now spend significant time educating international lenders about the new regime and using documentation to bridge the gap between legal reform and market perception.

Taken together, the conversation highlighted how a single set of global standards can manifest in vastly different ways, depending on political priorities, market maturity, and regulatory philosophy. Whether dealing with capital requirements, currency volatility, covenant expectations, or the rise of private credit, members agreed that uncertainty is now a defining feature of cross-border finance—and that clients increasingly rely on their advisers not just for technical accuracy but for clarity, perspective, and judgment. The meeting reinforced the value of comparing experiences across jurisdictions, helping members anticipate what's coming next in their own markets and refine how they guide clients through a regulatory landscape that remains anything but uniform.