FSB Report Highlights Lack of Comprehensive Data on Leveraged Lending

A recent report by the Basel, Switzerland-based Financial Stability board highlighted significant data gaps that are impeding regulators’ ability to conduct a comprehensive assessment of the financial stability risks associated with the market for leveraged loans and collateralized loan obligations.

The report estimated the total global leveraged loan market to be somewhere between $1.4 trillion and $3.2 trillion, and identified the direct holders 70% of leveraged loans and 86% of CLOs. However, “little is known, in particular, about the direct exposures of certain non-bank investors to these markets, including their holdings of lower-rated CLO tranches,” FSB said. “Moreover, limited information on indirect linkages between banks and non-banks makes it difficult to assess possible risks from spillovers and interconnectedness, and their systemic implications.”