CFTC probing whether leveraged-loan risks are offset by derivative trades

11 June 2019 4:40pm
The US Commodity Futures Trading Commission is examining how much lending to heavily indebted companies is hedged by derivative transactions that might mitigate the loans' potential hazards in a downturn, Chairman J. Christopher Giancarlo said.

“We’re using the data sets we have to understand how, when leveraged lenders lend, how do they offset that risk in the derivative market,” he said at a recent conference* in Washington. “How much of that is really at risk?”

Two banking analysts expressed skepticism that leveraged-loan risks that have drawn concern from many regulators can be eliminated with instruments such as credit-default swaps or margin payments.