Non-banks exposed to riskiest CLO tranches – Fed research
Risky holdings appear to be larger than market participants believe, economists say
Non-banks have sizable exposures to the riskiest tranches of collateralised loan obligations (CLOs), research from the Federal Reserve finds.
CLOs are syndicated loans repackaged and sold as securities in tranches. They typically have four tranches – senior, mezzanine, junior and equity – representing the riskiness of loans. Losses are first borne by equity holders, followed by junior, mezzanine, then senior holders.
The CLO market has grown rapidly over recent years, attracting attention from
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