The Basel Committee on Banking Supervision today issued a newsletter focusing on credit risk, which has risen in recent months due to inflation and the COVID-19 pandemic.
The federal banking agencies found increased credit risk in the Shared National Credit portfolio—a bundle of large, syndicated bank loans that includes 5,652 borrowers and totals $5.1 trillion—according to the SNC Review released today.
While financial regulators flagged an increase in leveraged lending prior to the outbreak of COVID-19, a new report from the Government Accountability Office today found that as of September, “they had not found that leveraged lending activities had contributed significantly to widespread financial instability.”
The share of low-rated commitments in the Shared National Credit portfolio rose slightly between 2018 and 2019, according to the SNC Review released today.
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.
Business debt is historically high relative to U.S. gross domestic product, with debt increasing most rapidly among the riskiest firms amid weak credit standards, the Federal Reserve said today in its financial stability report.
The Federal Open Market Committee announced yesterday that it would maintain the target range for the federal funds rate at the current 2.25-2.5%.
Corporate debt is rising, but not to so much as to cause concern.
With leveraged lending-related risk on regulators’ minds — and on the agenda of the House Financial Services Committee tomorrow — the ABA Banking Journal Podcast discusses the issue with ABA Senior Economist Curtis Dubay.
While corporate debt is at near-record levels and recent growth has been concentrated in riskier segments, “business debt does not appear to present notable risks to financial stability,” Federal Reserve Chairman Jerome Powell said today in Florida.