A U.S. bank regulator believes that banks should be increasingly aware of activity in the leveraged lending market, cautioning rapid growth in that sector by nonbanks could pose future risks to the financial sector, Reuters reported. The U.S. Office of the Comptroller of the Currency (OCC) highlighted loans to highly-indebted companies in its semiannual risk report issued yesterday. While lending by banks in that sector does not seem exceedingly risky, the OCC cautioned near-record issuance in that sector, driven by nonbanks like private equity firms and hedge funds, merits closer attention. Leveraged lending has attracted some attention in Washington of late. Sen. Elizabeth Warren (D-Mass.) pressed regulators earlier this month about underwriting standards in that market. The Federal Reserve is also hearing more from concerned parties about the leveraged loan market and how it could complicate future economic downturns.
