Brown urges FSOC to address risks in leveraged loan market

This story appeared in Bank Digest.                                   

Senate Banking Committee Ranking Member Sherrod Brown (D-Ohio) has written a letter to Treasury Secretary Steven T. Mnuchin, who is also chair of the Financial Stability Oversight Council, urging the FSOC to take action to address heightened risks in the leveraged loan market. According to Brown, "The marked increase in the volume of leveraged loans originated by financial institutions has been accompanied by a notable decrease in underwriting standards. Like many financial activities, leveraged lending benefits banks and financial intermediaries that profit by packaging and selling risky loans."

He added that the "FSOC must consider whether this additional risk to the banking system serves as a public benefit to the real economy." Brown requested that he be provided with any FSOC analyses and documents relating to leveraged lending, along with other information.