Sector developments and company hires

CLO vulnerabilities eyed
The Financial Stability Board has published a report assessing the financial stability implications of developments in the global leveraged loan and CLO markets. Based on a combination of available data and analyses from FSB members, the report concludes that vulnerabilities in the sector have grown since the financial crisis. Specifically, it notes that: borrower leverage has increased; changes in loan documentation have weakened creditor protection; and shifts in the composition of creditors of non-banks may have increased the complexity of these markets. Further, exposures are concentrated among a limited number of large global banks and have “a significant cross-border dimension”. The FSB says it will consider whether there is scope to close data gaps, will continue to analyse the financial stability risks and will discuss the regulatory and supervisory implications associated with leveraged loans and CLOs.

Risk participation programme
FMO and Munich Re have established a new unfunded risk participation programme, which will allow Munich Re to invest in the UN sustainable development goals by participating in FMO transactions for a total amount up to US$500m over the next three years via its risk-sharing framework agreement. By allowing Munich Re to participate in its underwriting process, the agreement supports FMO’s ambition to scale up private sector mobilisation and maximise funding towards developing countries in the financial institutions, energy and agribusiness sectors. By creating an efficient way of credit risk underwriting via portfolio solutions, the agreement also serves as a blueprint for further public-private partnerships.