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.

From scams to watch out for to the role banks play in an SBA virus loan program, news about the pandemic's impact was everywhere. Also: As State Farm bows out, U.S. Bank seizes an expansion opportunity; CFPB sues Fifth Third for allegedly opening phony accounts; and more from this week's most-read stories.

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.