Regulators Alarmed by Risky Loans, But Don’t Know Who Holds Them
By Sally Bakewell and Thomas Beardsworth
The steady drumbeat of warnings over the surge in risky corporate borrowing is growing louder and louder. Time and again, regulators in the U.S. and Europe have pointed to the hazards of businesses taking on too much debt. …Just because the banks are safer doesn’t necessarily mean the financial system is, says Karen Petrou, managing partner at Federal Financial Analytics, a regulatory-analysis firm. Debt investors might not be as resilient in a crisis and create shock waves throughout the system. “Banking regulators are being a little myopic when they’re looking only at the banking system for systemic risk,” she said. “That’s the fundamental missing point that I have seen the banking agencies are over-sanguine about.”