ECB Pushes Banks to Reduce Risk in Booming Leveraged-Loan Market

The European Central Bank is pushing banks to improve how they control risks when they extend credit to highly-indebted companies, a growing business that promises both higher returns and a greater potential losses than traditional lending.

The ECB is considering measures including extra capital requirements for banks that don’t adequately address the risks they face in making leveraged loans, according to a spokeswoman.

Leveraged finance -- which frequently involves lending to companies as part of a takeover by a private-equity firm -- is booming as banks seek higher margins in a period of low interest rates. It has been a ...