Leveraged lending creates challenges in UK stress tests

Bank of England
Photo: Juno Snowdon Photography

UK banks suffered greater losses from impairments due to leveraged lending in the 2019 stress tests conducted by the Bank of England and on some assumptions a few firms would fail to clear minimum “hurdle rates”.

Many banks have increased their lending to riskier corporate borrowers, according to the BoE results, published today (December 16). While mortgage losses under stress have fallen relative to the 2018 tests, corporate losses have increased due to higher exposures, a heavier global

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