Riskiness of Corporate Debt Is Increasing, BOE's Cunliffe Says

(Bloomberg) -- The riskiness of corporate debt in advanced economies, especially the U.S., has risen in recent years, the Bank of England’s Deputy Governor for Financial Stability Jon Cunliffe said.

Speaking in London, Cunliffe said that the “right response to this picture is to ensure that the financial system is sufficiently resilient to a very severe but plausible correction in values should it occur.” He noted that household and financial-sector debt have been stable for a number of years.

BOE Governor Mark Carney said earlier this year that corporate debt alongside the slowdown in China and rising tensions surrounding trade policy are all potential risks to global growth. Cunliffe highlighted that the rise of market-based finance hasn’t been tested by a loss of confidence in an asset class such as high-yield corporate debt or leveraged loans.

The deputy governor also reiterated the risks to financial stability from Brexit, saying it would be “uncomfortable” if the U.K., with its large financial services industry, ends up being regulated by a system in which it has no say. He also said weakening regulation after the departure from the European Union would create risks.

©2019 Bloomberg L.P.