On 19 December 2019, the Financial Stability Board (FSB) published a report on vulnerabilities associated with leveraged loans and collateralised loan obligations (CLOs). The report assesses the financial stability implications of developments in the leveraged loan and CLO markets. It provides a global perspective by combining available data and analyses from FSB members.

The main conclusions from the report include:

  • a number of factors suggest that vulnerabilities in the leveraged loan and CLO markets have grown since the global financial crisis;
  • available data indicates that banks have the largest direct exposures to leveraged loans and CLOs. These exposures are concentrated among a limited number of large global banks and have a significant cross-border dimension; and
  • more work is needed to close the remaining data gaps and assess in a comprehensive manner the possible financial stability implications associated with leveraged loans and CLOs.