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ECB Is Said to Consider Firm Limits on Riskiest Leveraged Loans

  • ECB held early stage talks on caps for highly-leveraged loans
  • Some ECB board members reluctant about curbs if risks managed

The European Central Bank is weighing curbs on the riskiest part of banks’ lending to indebted companies amid fears of a potential blow-up in the market, according to people with knowledge of the matter.

Officials on the ECB’s supervisory board have discussed capping newly originated highly-leveraged transactions at a certain share of individual banks’ balance sheets, the people said, asking not to be identified as the matter is private. Still, some members are reluctant to follow that course if banks can show that they’re adequately managing risk, the people said. Talks are at an early stage and caps may not be the chosen action, they said.