Leveraged Lending Quality Weak After Warnings, Fed Says

U.S. bank leveraged lending continues to show serious deficiencies well after regulators warned that they were seeing too many risky loans, according to a review by the Federal Reserve and other agencies.

Banking regulators said the findings released today -- based on an examination of $3.39 trillion in credit commitments that included $767 billion in leveraged loans -- will trigger more aggressive scrutiny. Leveraged lending represented the bulk of underwriting problems regulators observed, even as the share of criticized leveraged loans dropped to 33 percent from 42 percent in a year.