Fed's Powell Finds Growing Risk In Leveraged Loans

Although low interest rates haven't led to much of an increase in post-crisis risk taking by U.S. banks, lenders have originated an increased number of risky leveraged loans, Federal Reserve Gov. Jerome Powell said Friday at a forum on international macroeconomics and finance. Powell said there's a similar pattern of increased risky loan underwriting by international lenders. "Together, these results suggest a potential spillover from accommodative U.S. monetary policy through increased risk-taking in syndicated loans globally, although preliminary results also indicate that investors still require extra return for this extra risk," Powell said. He added developments in U.S. bond portfolios do not indicate a worrisome pickup in risk-taking in external investments.

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