Fed's Powell Says Leveraged Lending Doesn't Pose Systemic Risk to Banks

The video discusses the leveraged loan market and its potential risks. While it doesn't pose systemic risks, it could lead to macroeconomic issues during economic downturns. Companies with high debt may struggle, amplifying downturn effects. Banks have reduced their exposure to these risks through improved supervision and risk management, unlike before the financial crisis.

What type of risk does the leveraged loan market primarily pose according to the speaker?

• Environmental risk

• Technological risk

• Macroeconomic risk

• Systemic risk

How might companies that borrowed heavily during good times be affected by an economic downturn?

• They will face no impact.

• They will increase their borrowing.

• They may struggle to fulfill their economic roles.

• They will easily repay their debts.

What change in bank practices is highlighted in the discussion?

• Banks have shifted risk management to holders rather than themselves.

• Banks have stopped supervising loans altogether.

• Banks have reduced their involvement in risk management.

• Banks have increased their exposure to risky loans.

What is the primary focus of bank supervision in the context of leveraged loans?

• Enhancing technological infrastructure

• Improving customer service

• Reducing systemic risk

• Increasing loan amounts

What was a significant issue with banks before the financial crisis that has since changed?

• Banks had no involvement in leveraged loans.

• Banks had large pipelines of commitments.

• Banks had low exposure to non-financial corporations.

• Banks had a strong focus on environmental risks.