Fed’s stress tests to gauge banks’ leveraged loan risks

Top US banks will be examined on their ability to cope with a mass sell-off of risky loans and structured products in the Federal Reserve’s latest stress tests.

The global market shock in this year’s Dodd-Frank Act stress test (DFAST) and Comprehensive Capital Analysis and Review (CCAR), which systemic firms are subject to, assumes that mutual and exchange-traded funds loaded with leveraged loans and high-yield bonds face a flood of redemption requests, causing these assets to tank in price

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