The Federal Reserve and other bank regulators said industries hit hardest by the Covid-19 pandemic have seen a major spike in leveraged loans categorized as particularly weak.
Companies most impacted by the economic crisis have seen their borrowings, including leveraged loans, considered “non-pass,” rise to 29.5% in last year’s third quarter from 13.5% in the same period a year earlier, according to a report the regulators released Thursday. But the agencies, which also include the Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency, found that banks held less than a quarter of all non-pass loans.
“While risk has increased, many agent banks have strengthened their risk management systems since the prior downturn and are better equipped to measure and mitigate risks associated with loans in the current environment,” the agencies said in a statement accompanying their release of the Shared National Credit Review.
The regulators studied the characteristics of $5.1 trillion in complex lending involving multiple firms, with half of it representing leveraged loans. The Covid-19 damage was most concentrated in industries including entertainment, oil and gas, real estate, retail and transportation, the report said.
