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We investigate the impact of the 2014 Interagency Clarification on the leverage risk premium for bank- and nonbank-originated loans. Using a novel dataset from 2011 to 2019, we show that leveraged loan spreads have declined rapidly for nonbank facilities relative to bank facilities since the...
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We explore empirically how the time-varying allocation of credit across firms with heterogeneous credit quality matters … credit allocation, captured by Greenwood and Hanson (2013)'s ISS indicator, helps predict downside risks to GDP growth and … systemic banking crises, two to three years ahead. Our analysis indicates that the riskiness of credit allocation is both a …
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