As competition increased in the past year among bankers to arrange leveraged loans and other products, credit underwriting standards may have been eased too much, the Financial Stability Oversight Council warned Tuesday.
In its first annual report, the council of top government financial regulators called for more due diligence by financial institutions, including monitoring deal features that may allow borrowers to take on excessive risk.
The government and industry should devote high attention to the potential problems of new financial products could pose, the FSOC said. "Market participants, as issuers or investors, should work to ensure that they have an adequate understanding of the risk that products such as exchange traded funds and structured notes present, including impacts under strained market conditions."
The FSOC Chairman, Treasury Secretary Timothy Geithner, said financial executives need to take a more active role in lowering systemic vulnerabilities by establishing
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