The Bank of England has issued a stark warning over the risks posed by private credit and leveraged finance to financial stability in a higher interest rate environment.
In its Financial Stability report published today (6 December), the central bank said the adjustment to higher interest rates continues to make it more challenging for households and businesses in advanced economies to service their debts. The BoE said that riskier corporate borrowing in financial markets, such as private credit and leveraged lending markets, which have roughly doubled in size in the last decade, "appear particularly vulnerable". Businesses that have borrowed in these markets face greater risk of default given that their debt tends to be floating rate and because they...
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