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International financial watchdog launches review of growing leveraged loan market

Financial Stability Board launches an inquiry into the risks surrounding popular corporate debts.

Photo: KLINT PETER

Financial Stability Board (FSB), a global body that includes all G20 economies has launched an inquiry of collateralized loan obligations, CLOs, into potential financial stability risks, reports Financial Times.

CLOs are advanced financial instruments consisting of bundles of leveraged loans that are sold in tranches. The CLOs have become very popular in recent years, as a consequence of the low interest rates and the favorable loosened loan terms, however, according to FSB, they pose a risk.

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