Fed to stress-test banks’ leveraged loan exposures
Test features leveraged loan shock; scenario includes biggest-ever rise in unemployment
The US Federal Reserve is to stress-test banks on their exposure to leveraged loans and collateralised loan obligations (CLOs) as part of this year’s stress tests.
Banks with large trading operations will have to factor in a global market shock, which includes “heightened stress” to trading book exposures to leveraged loans.
“This year’s stress test will help us evaluate how large banks perform during a severe recession, and give us increased information on how leveraged loans and
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