The Soapbox

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Right, but regulated banks own a much smaller piece of that systemic risk

Today than they did 10 years ago because of stricter regulation both in terms of regulatory capital requirements at the holding company and strict governors on leverage at the loan level. Most of that capacity has been absorbed by non bank lenders like BDCs, hedge funds, Mezz funds etc who have offered cheap pricing/high leverage backseat their cost of capital is low and they are not governed by regulatory capital requirements. It’s one of the main reasons our banks entered the current crisis in such good shape.

While aggregate leveraged loan volume is up substantially over the past decade...systemic risk is way down...there’s no systemic risk in Goldberg capital, Prospect Street or any other large BDC lender going down...just pain for their shareholders.

(In response to this post by RickPerry)

Posted: 07/03/2020 at 1:17PM

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