Leveraged loans

Junk-rated companies and private equity firms have lined up about $17 billion of debt recently for purchases of everything from power plants to a chain of gas stations using 364-day bridge loans.

Octaura, an electronic portal backed by seven global banks, completed its first syndicated loan trades earlier this month.

Banks across Europe and the U.S. committed to lend tens of billions of dollars for leveraged buyouts and acquisitions. Now they need to find buyers for the debt, and demand is relatively weak.

The $1.38 trillion U.S. leveraged loan market is nearing an innovation that could finally shift back-office operations to a centralized system and away from investors having to manually track their positions — a process that can still include the occasional fax.

DMG Bancshares, formed by banking veteran Don Griffith, wants to buy more West Coast banks. For California First, the sale ends a four-year period in which it substantially shrank its loan book after it was ordered to shed leveraged loans.

Time and again, Janet Yellen has warned Wall Street is piling a dangerous amount of debt onto the balance sheets of risky U.S. businesses. But as she prepares to take over as Treasury secretary, she may find it difficult to do anything quickly to rein in these markets, experts say.

Defaults have been milder than expected thanks to government relief and stricter underwriting. But with the crisis dragging on and policymakers unable to agree on a stimulus plan, loans to highly indebted companies remain at risk.

While rival banks reported increases in loans and deposits, thanks largely to their participation in the Paycheck Protection Program, State Street and Bank of New York Mellon saw their balance sheets shrink in the second quarter.

The central bank's Financial Stability Report said companies may face difficulties repaying debt given lower earnings, “which could trigger a sizable increase in firm defaults."

The one-year relief is intended to free up lending to consumers and businesses; the online small business lender not making loans, shrinks credit lines, staff.

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Banks may be protected from a direct hit, but they have invested in vehicles that include such loans, potentially exposing them to defaults.

Wells Fargo appears to be outpacing its rivals in the API race; CFPB's unexpected showdown with Citizens; Varo gets vital FDIC OK for bank charter; and more from this week's most-read stories.

Regulators are alarmed about banks' rising exposure to high-risk corporate credits and want more data on how they would perform in a recession.

Certain loan segments are showing signs of deterioration, but consumer lending and digital banking are bright spots. Meanwhile, bankers are eyeing opportunities to improve efficiency, add scale and take advantage of M&A disruption. Here's what to expect from smaller regionals in the year ahead.

The board- and management-level handing of CRE concentration was the chief concern of FDIC examiners, making up more than 56% of all the supervisory recommendations regulators made in the two-year period.

The bank is the first U.S. one approved for a majority-owned securities unit in China; the FSB said banks must get serious about replacing the benchmark.

Barely noticed in a corner of the financial markets, leveraged loans originally worth about $40 billion are staging their own private meltdown.

Members of the House Financial Services Committee cited leveraged lending, cybersecurity and the switch to a new interest rate benchmark among potential systemic risks that keep them up at night.

By turning to investors outside traditional banking, private-equity firms are finding it easier than ever to get loans to finance their buyouts of corporations that are nowhere close to being profitable.