Banks questioned by US examiners about 'insatiable' credit-risk appetite

4 April 2019 9:58pm
US bank supervisors’ concerns about growing marketplace demand for risky debt amid low interest rates is prompting questions to bankers about possible new ventures in the loan and bond markets, the US Comptroller of the Currency’s Morris Morgan said.

“We think this increasing appetite for credit risk is something we can’t afford to lose sight of,” Morgan, the OCC’s senior deputy comptroller and chief operating officer, told an industry conference* Tuesday. “We’re spending time with bankers asking, as this market continues to expand, how might they be tempted to participate in the credit expansion in ways they haven’t to date.”

He added: “Credit risk has historically been the primary cause of solvency concerns.”

Morgan cited recent increases, to pre-crisis highs, in consumer debt levels and leveraged loans, or lending by banks, hedge funds and private equity firms to already heavily-indebted companies.