Watchdog Warns on Rising Risks In Leveraged Loans

An influential global watchdog has warned that the vast market for leveraged loans has become increasingly vulnerable to shocks, in a move that could heighten regulatory scrutiny of the risks surrounding corporate debt, the Financial  Times reported. The Basel-based Financial Stability Board said in a report on Thursday that the recent rapid growth in leveraged loans — credit for lowly rated, more indebted companies — has been accompanied by a weakening of protections for lenders that has not been fully priced into markets. The group of central bankers and regulators also raised concerns over collateralised loan obligations (CLOs), which are bundles of leveraged loans that are sold to investors in tranches. Read more

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