May 7, 2019 - On May 6, 2019, the Federal Reserve issued its second Financial Stability Report, which included a section on “Vulnerabilities Associated with Elevated Business Debt”. The section discusses higher leverage, lower ratings and looser documentation in corporate credit and their potential impact on defaults when an economic slowdown materializes. However, the report also noted that, systemically, the holders of debt generally seem well positioned to deal with their exposures. In fact, the LSTA has done similar research, which is available in this attachment as well as in a number of presentations that we have published. The LSTA supports regulators doing their jobs and reviewing market risks. Their analyses reveal, as does ours, that while credit risk may be increasing, systemic risk in the loan space is well below where it stood in 2007. The LSTA stands ready to work with regulators as they do their due diligence on this vibrant and important market.