FINANCIALS: ECB Delayed Lev-Loan Probe: May Indicate Less Fear Around Credit

ECB delaying leveraged loan investigation – not credit material but interesting that ECB moving to be slightly less belligerent towards the banking system. This could be a result of it feeling more relaxed about credit quality more widely.

• The ECB has been investigating the leveraged loan market, which generally lends into the private capital industry, since at least June. A range of the large European banks, along with local units of the US bulge bracket investment banks have been named.
• The review has, according to BBG, come up against some serious industry complaints; this, in itself, isn’t unusual but, reportedly, the voracity of the complaints has led the ECB to slow and review the process. Publication is not seen until “at least” September now.
• We take the view that any the likely increased provisioning indicated in reports to now would have been a credit positive, albeit a tiny one. Therefore, the delayisn’t, itself, that relevant. It may, however, be indicative of a more bullish ECB view on credit, especially in the lev-loan market, which is a more interesting market indicator.