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Loose Leveraged Lending Is Storing Up Economic Trouble, BIS Says

  • Covenants are becoming weaker as debt buyers chase yield
  • Loan funds are potentially the way risk enters banking system
Views Of Wall Street As U.S. Stocks Slip
Photographer: John Taggart/Bloomberg
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One of the world’s senior financial regulators is sounding the alarm about surging high-risk lending.

The Bank for International Settlements warned that likely distress among indebted borrowers may spread into the wider economy as central banks raise interest rates. It’s not just the total debt, but the fact that investors seem less and less concerned about protecting themselves against losses, the BIS said.