Regulators Warn Banks on Leveraged Loans, But Data Doesn’t Back Them Up

Regulators Warn Banks on Leveraged Loans, But Data Doesn’t Back Them Up

In an American Banker op-ed, BPI’s Francisco Covas and Bill Nelson showed that the share of leveraged loans in the SNC dataset that are troubled has actually declined and encouraged the banking agencies to report the fraction of leveraged loans held by banks and the riskiness of leveraged loans held by banks relative to nonbanks. On January 25, the federal banking agencies released their review of shared national credits — the $4.4 trillion in syndicated loans that are held by three or more regulated financial institutions. This program was created to evaluate large loans held by multiple banks. The report does not provide any statistical evidence that risks associated with leveraged loans held by banks have increased or that banks, as opposed to other holders of such loans, should be cautioned about those risks.

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