EDITOR NOTE: Collateralized Loan Obligations are making Wall Street richer the same way that bundled mortgages did a short time ago--with the same risks for the economy. Japan warns its banks about the risks of overseas (read: American) CLOs.
TOKYO—Japanese regulators have warned the nation’s banks for the first time about the risk of investing in overseas securitized corporate loans, which have run into trouble from a wave of U.S. bankruptcies.
Japan’s banks collectively hold nearly 20% of the $750 billion global market for corporate debt packaged into securities called collateralized loan obligations, according to a report by the central bank and the Financial Services Agency—an outsize portion given that the securities aren’t issued in Japan.
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