After a rollercoaster year in which risk measures for leveraged loans and collateralized loan obligations (CLOs) spiked and then retreated, GARP asked risk managers in late October 2020 how aware their organizations were of such risks and how concerned they were about them. The results show considerable concern about the potential for large defaults and losses, but confidence that businesses are sufficiently prepared.
96% believe default risk has increased since
the start of 2020, and two-thirds expect an
increase in 2021.
63% predict no impact or only minor impact if defaults become widespread
ONLY 11% predict a major impact
MORE THAN 85% believe there is a very or moderately
significant risk that recovery rates will be much worse
than in past episodes of stress.
CONCERNING LEVERAGED LOANS DEFAULT:
CONCERNING CLOS IN PARTICULAR:
The GARP Risk Snapshot “Leveraged Loans Survey” polled 87 Financial Risk Managers (FRM®) from The Americas, Europe and Asia in October 2020. Read Taking the Temperature of Risk Managers: The Outlook on Leveraged Loans to learn more.