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Banks Exposed to Possible Leveraged-Loan Market Tumult, BIS Says
Banks may be exposed to a shakeout in the $1.3 trillion leveraged-loan market even though they mostly own the safest portions of debt, according to the Bank for International Settlements.
Lenders could be vulnerable if they’ve extended credit lines to leveraged borrowers, rely on fees from collateralized loan obligation managers or struggled to rebuild capital reserves since the last crisis, analysts at Basel-based BIS said in a report published on Sunday.
CLOs, which slice up pools of loans into securities of varying risks, are attracting scrutiny from regulators because they’ve soared in popularity since their senior tranches survived the last crisis unscathed. Japanese lenders account for about 60% of the direct bank ownership of CLO tranches, BIS said, while lenders including Deutsche Bank AG are also buying the safest tranches to boost returns on their spare cash.
“The concentration of exposures in a small number of banks may result in pockets of vulnerability,” BIS analyst wrote. “In general, banks are likely to face lower losses from direct securitization exposures and should be in a better position to manage them than in the 2006–07 subprime crisis.”
https://www.bloomberg.com/news/articles/2019-06-30/banks-exposed-to-possible-leveraged-loan-market-tumult-bis-says
see this from march 5
Corporate Bonds at Risk of Crash on Abrupt Downgrades, BIS Says
Surging supply of corporate debt in the riskiest investment-grade category leave markets vulnerable to a rout if economic weakness triggers bouts of rating downgrades, according to the Bank for International Settlements.
Investment-grade bonds classed BBB by ratings firms – one step above junk status – have proved popular with funds bound by their own rules to hold only low-risk securities. While central banks pursued cheap money policies in the years after the financial crisis, such bonds offered tempting yields while still falling into the low-risk category that made them eligible holdings.
https://www.bloomberg.com/news/articles/2019-03-05/bis-warns-of-corporate-bond-crash-risk-from-abrupt-ratings-cuts
White House official: New sales to China's Huawei to cover only widely available goods
WASHINGTON (Reuters) - President Donald Trump’s decision to allow expanded sales of U.S. technology supplies to Chinese telecommunications giant Huawei will only apply to products widely available around the world, and leave the most sensitive equipment off limits, a top White House aide said on Sunday.
“All that is going to happen is Commerce will grant some additional licenses where there is a general availability” of the parts the company needs, National Economic Council chairman Larry Kudlow said on “Fox News Sunday.”
U.S. microchip firms in particular “are selling products that are widely available from other countries … This not a general amnesty … The national security concerns will remain paramount,” he said.
The partial lifting of restrictions on Huawei was a key element of the agreement reached over the weekend between President Donald Trump and Chinese President Xi Jinping to reopen stalled trade negotiations between the two countries.
It has drawn bipartisan criticism from U.S. Senators concerned that Huawei has close ties to Chinese intelligence agencies that could exploit the global distribution of its technology.
“There will be a lot of pushback if it is a major concession,” to Huawei, South Carolina Republican Senator Lindsay Graham said on “Meet the Press.”
Huawei, the world’s biggest telecommunications equipment maker and No.2 smartphone maker, denies its products pose a security threat and has sought to fight back in U.S. courts since Washington put it on an export blacklist last month. Kudlow said that designation would remain.
Kudlow said the broader concerns about Huawei will be part of the renewed discussions.
The agreement over the weekend “is not the last word,” Kudlow said.
https://www.reuters.com/article/us-usa-trade-china-huawei-tech/white-house-official-new-sales-to-chinas-huawei-to-cover-only-widely-available-goods-idUSKCN1TV0PO
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