The European Central Bank (ECB) wants to put a damper on the market for leveraged loans even before it heats up.
Banking supervisors will look at individual lenders' exposure to the loans, which are often used to finance corporate buyouts, and other risky debt to preempt the threat that risks could quickly mount in the market, Sabine Lautenschlaeger, vice chair of the ECB's supervisory arm, said in New York on Tuesday. The ECB also may publish regulatory guidelines to set expectations for the industry, she said.
“I do not see it as the biggest risk, but I see a certain danger that market players see things a tad brighter than they are,” Lautenschlaeger said. “So it is up to me as a supervisor, and up to you as risk managers, to counterbalance this view,” she said in a speech to the Global Association of Risk Professionals.
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