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Fed Issues More Warnings on Danger of High-Risk Company Debt

  • Leveraged lending flagged in latest financial stability report
  • Central bank began issuing the twice-yearly reports last year
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Fed Escalates Warnings on High-Risk Corporate Debt
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The Federal Reserve escalated its warnings about the perils of risky borrowing by businesses Monday, saying firms with the worst credit profiles are the ones taking on more and more debt. The Fed also left a question unanswered: Is it going to do anything about it?

The U.S. central bank’s latest financial stability report said leveraged-lending issuance grew 20 percent last year, and that protections included in loan documents to shield lenders from defaults are eroding. While the Fed board voted unanimously to approve the report, it didn’t indicate any course of action the governors might take to rein in the red-hot market.