Banks could be stuck with riskiest corporate loans during downturn – Fed paper

Federal Reserve

Banks may be forced to hold on to the riskiest loans during a downturn, research published by the Federal Reserve finds.

Seung Jung Lee et al use a dataset that links credit and pricing information to examine the disruption of corporate loans from 2010–18. They examine the loan syndication process, which involves a group of lenders funding various portions of a single loan.

The authors find that, at the end of 2018, the amount of outstanding leveraged loans – those graded BB or lower – was $1

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