[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"detail-sidebar-cat-0-en-105":3,"doc-seo-321555-105":59,"doc-detail-321555-en":123},{"code":4,"msg":5,"data":6},0,"success",[7,13,18,23,28,33,38,43,48,51,55],{"id":8,"doc_module":4,"doc_module_name":9,"category_name":10,"show_sort_weight":11,"slug":12},1,"Document","Story & Novel",90,"story-novel",{"id":14,"doc_module":4,"doc_module_name":9,"category_name":15,"show_sort_weight":16,"slug":17},2,"Literature",80,"literature",{"id":19,"doc_module":4,"doc_module_name":9,"category_name":20,"show_sort_weight":21,"slug":22},4,"Exam",70,"exam",{"id":24,"doc_module":4,"doc_module_name":9,"category_name":25,"show_sort_weight":26,"slug":27},5,"Comic",60,"comic",{"id":29,"doc_module":4,"doc_module_name":9,"category_name":30,"show_sort_weight":31,"slug":32},6,"Technology",50,"technology",{"id":34,"doc_module":4,"doc_module_name":9,"category_name":35,"show_sort_weight":36,"slug":37},7,"Healthcare",40,"healthcare",{"id":39,"doc_module":4,"doc_module_name":9,"category_name":40,"show_sort_weight":41,"slug":42},8,"Research & Report",30,"research-report",{"id":44,"doc_module":4,"doc_module_name":9,"category_name":45,"show_sort_weight":46,"slug":47},9,"Religion & Spirituality",20,"religion-spirituality",{"id":46,"doc_module":4,"doc_module_name":9,"category_name":49,"show_sort_weight":46,"slug":50},"World Cup","world-cup",{"id":52,"doc_module":4,"doc_module_name":9,"category_name":53,"show_sort_weight":52,"slug":54},10,"Lifestyle","lifestyle",{"id":56,"doc_module":4,"doc_module_name":9,"category_name":57,"show_sort_weight":24,"slug":58},19,"General","general",{"code":4,"msg":60,"data":61},"ok",{"site_id":62,"language":63,"slug":64,"title":65,"keywords":66,"description":67,"schema_data":68,"social_meta":116,"head_meta":118,"extra_data":120,"updated_unix":122},105,"en","bank-lending-to-lbos-risks-and-supervisory-response","Bank Lending to LBOs: Risks and Supervisory Response","","In the mid- and late 1980s, increased debt financing reshaped corporate restructuring in the United States, with leveraged buyouts (LBOs) becoming a prominent highly leveraged funding mechanism. Growing attention from media, Congress, and regulators reflects the scale of recent transactions and the concerns raised by bank participation in LBO lending. The Economic Commentary reviews key risks tied to lending to highly leveraged firms and outlines current supervisory responses by federal bank regulators.",{"@graph":69,"@context":115},[70,84,106],{"@type":71,"itemListElement":72},"BreadcrumbList",[73,77,79,82],{"item":74,"name":75,"@type":76,"position":8},"https://docshare.wps.com","Home","ListItem",{"item":78,"name":9,"@type":76,"position":14},"https://docshare.wps.com/document/",{"item":80,"name":40,"@type":76,"position":81},"https://docshare.wps.com/document/research-report/",3,{"item":83,"name":65,"@type":76,"position":19},"https://docshare.wps.com/document/bank-lending-to-lbos-risks-and-supervisory-response/321555/",{"url":83,"name":65,"@type":85,"image":86,"author":91,"headline":65,"publisher":94,"fileFormat":97,"inLanguage":63,"description":67,"dateModified":98,"datePublished":99,"encodingFormat":97,"isAccessibleForFree":100,"interactionStatistic":101},"DigitalDocument",{"url":87,"@type":88,"width":89,"height":90},"https://docshare.wps.com/thumbnails/bank-lending-to-lbos-risks-and-supervisory-response/321555.png","ImageObject",300,407,{"name":92,"@type":93},"Jiven","Person",{"url":74,"name":95,"@type":96},"DocShare","Organization","application/pdf","2026-10-29","2026-09-21",true,{"@type":102,"interactionType":103,"userInteractionCount":105},"InteractionCounter",{"@type":104},"ViewAction",13,{"@type":107,"mainEntity":108},"FAQPage",[109],{"name":110,"@type":111,"acceptedAnswer":112},"What is the central risk discussed for LBO-related bank credits under deposit insurance?","Question",{"text":113,"@type":114},"If deposit guarantees reduce perceived risk, banks may under-price LBO credit risk and increase LBO lending beyond what would occur without such guarantees.","Answer","https://schema.org",{"og:url":83,"og:type":117,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":119,"canonical":83},"index,follow",{"doc_id":121,"site_id":62},321555,1790306026,{"code":4,"msg":5,"data":124},{"doc_id":121,"user_id":125,"nickname":92,"user_avatar":126,"doc_module":4,"category_id":39,"category_name":40,"doc_title":65,"doc_description":67,"doc_content":127,"file_id":128,"file_url":129,"file_type":130,"file_size":131,"view_count":105,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":34,"language":132,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":133,"faqs":134,"seo_title":135,"seo_description":67,"update_tm":136,"read_time":137,"preview_page_count":4},1099513958607,"https://ap-avatar.wpscdn.com/avatar/100002390cf8733938c?x-image-process=image/resize,m_fixed,w_180,h_180&k=1778829742770036399","by James B.Thomson  \nAn increased use of debt financinghas beena hallmark of the financialrestructuring of corporate America thathas taken place in the mid-and late1980s.An organization that developsfrom a corporate reorganization nowcommonly has 80 to 90 percent of itsfinancing in the form of debt,in con-trast to the 30-percent debt-to-assetsratio that prevailed in the previous twodecades.Because of the high degree ofleverage employed in these deals,theyare often referred to as leveragedbuyouts(LBOs),a form of highlyleveraged financings.  \nThe news media.Congress,and the reg-ulatory community have all focusedconsiderable attention on LBOs in re-cent months,largely because of the useof this financing arrangement to fundcorporate takeovers.Media interest hasbeen heightened by the size and volumeof recent deals,particularly the reported$25.3 billion that the fim of Kohlberg.Kravis &Roberts paid for RJR Nabis-co.The total volume of LBO deals for1988 exceeded $98 billion.  \nCongressional attention concerns theuse of LBOs in takeover deals that in-volve a major restructuring of the ac-quired company.The result in suchdeals may be layoffs and plant closings  \n# Bank Lending to LBOs:Risks and Supervisory Response\n\nin communities where the acquiredfirm is the major,and sometimes only,employer.Some members of Congressare also wary of the LBO market'spotential effect on consumer and small-business credit and on the stability ofthe financial system itself.Further-more,because the tax code makes debtfinancing relatively less expensive thanequity financing,Congress is con-cerned that tax considerations alonemay be a major motivation behindmany of the LBO deals.The LBO situa-tion is so important that only the $100billion thrift-industry bailout anddeposit-insurance reform take prece-dence over it on the 101st Congress'sagenda for regulatory reform in thefinancial sector.  \nBank regulators are becoming increas-ingly interested in bank participation inLBO lending because of the dramatic in-crease in LBO credits on bank port-folios.The Comptroller of the Currencyestimates that of the S150 billion toS180 billion in LBO debt outstanding,$80 billion is held by U.S.banks.Most of this exposure has been accumu-lated in recent years.In fact,estimatesof total bank lending for LBOs in 1988may exceed $48 billion(excluding $15billion in bank loans to RJR Nabisco).  \nFebruary 15,1989  \nLeveraged buyouts(LBOs),apopular method of corporate restruc-turing in the past decade,have at-tracted significant attention amongthe news media,Congress,and bankregulators.The huge size of recenttakeover deals and the dramaticincrease in LBO credits on bankportfolios have raised concernsabout the risks of LBO financing.This article examines these risks anddiscusses the current response ofbank supervisory authorities to theincreased use of funding byleveraged buyouts.  \nIn addition,analysts estimate that LBOcredits on bank portfolios equal 18 per-cent of the total dollar volume of com-mercial and industrial loans and 50 per-cent of bank capital.²Concentration ofLBOexposure is uneven;one pub-lished estimate of LBOexposure forthe 10most active banks in the LBOmarket cites a range from 40 to 140 per-cent of equity capital.³  \nBank regulators are concerned aboutthe impact of increased LBOexposureon bank soundness and,ultimately,onthe regulatory safety netHigh levels ofleverage are thought to be associatedwith both increased risk and largerexpected returns than most loans toless-leveraged customers.Assumingthe current system of federal deposit in-surance remains intact,federal depositguarantees may cause banks to under-price the risk of LBO credits and tobook more LBO loans for their port-folios than they would in the absenceof deposit guarantees.Because ofthese incentives,it is likely that LBO-related credits will be a point of ex-posure in the banking system.  \nThis Economic Commentary looks atthe risks associated with LBO lendingand the current response of federalbank regulat","cbCaicOvCKtouiWI","https://ap.wps.com/l/cbCaicOvCKtouiWI","pdf",1414978,"English","# Bank Lending to LBOs: Risks and Supervisory Response\n## A Brief Primer on LBOs","[{\"question\":\"What is the central risk discussed for LBO-related bank credits under deposit insurance?\",\"answer\":\"If deposit guarantees reduce perceived risk, banks may under-price LBO credit risk and increase LBO lending beyond what would occur without such guarantees.\"}]","Bank Lending to LBOs: Risks and Supervisory Response | PDF",1789959658,18]