FSB warns about leveraged loans and CLOs

摘要

The financial stability board has warned of vulnerabilities associated with leveraged loans and CLOs, and their implications for financial stability. Echoing earlier concerns raised by the Bank of England and other central banks, a report released by the FSB last week retells a familiar tale of increased leverage and weaker covenants in underlying loans, and their potential to exacerbate investor reaction to shocks. A shift in the composition of leveraged loan investors from banks to non-banks "may have increased the complexity and opacity of the leveraged loan and CLO markets, potentially introducing new risks and avenues for shock transmission," the report says.