Powell speech: Another fast rise in business debt could increase vulnerability “appreciably”

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The Federal Reserve (Fed) Chair Powell is on the wires now, via Reuters, making his scheduled speech titled “Assessing Risks to our Financial System” at the Financial Markets Conference, in Florida.

Main Headlines:

Business debt at historic levels should cause businesses and investors to “pause and reflect”.

Warns that while growth in business debt appears to have moderated, another fast rise could increase vulnerability “appreciably”.

It is “good news” that large banks hold only $90b of the $700b collateralized loan obligation market, but fed would “benefit” from more information on who holds the rest.

The level of business debt would not lead to “broad harm” if economic conditions deteriorate, though individual borrowers could face “severe strain”.

Sees overall moderate risks to financial system of high levels of business borrowing, considers debt growth product of long economic expansion.

Fed takes seriously risks of “opaque” financing as source of fast growth of business debt.

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