Bloomberg: Fed Said to Warn Banks on Leveraged Loans
Bloomberg reported, citing a person familiar with the conversations, Fed officials are warning banks that rising levels of high-risk, high-yield loans on their balance sheets may require more capital held against them.
According to data compiled by Bloomberg, banks have arranged about $411 billion of leveraged loans sold to investors this year, compared with a record $696 billion in all of 2013.
Bloomberg said, according to a Barclays research report, that “covenant-lite” loans, which lack requirements that can help protect lenders, are on pace to exceed 70% of total issuance this year.
To read the entire Bloomberg report, click here.