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The Bank of England warned exposure to junk debt could lead to another subprime mortgage-style meltdown
The Bank of England has warned the $1.4trn risky loan market could lead to another fallout similar to the US subprime mortgage crisis that contributed to the 2008 Global Financial Crisis.
New research, from the Bank's November financial stability report has revealed exposure to leveraged loans that fund the most debt-ridden companies was around $405bn. The collatorised loan obligations (CLOs) are largely held by banks, insurers and pension schemes and the Bank said the risky loans have fuelled a rise in corporate leverage. The news that the debt boom could "amplify economic downturns" and lead to "deeper recessions," as stated in the report, has caused concern among policymakers at the US Federal Reserve and European Central Bank, according to The Telegraph. Last we...
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