Leveraged Lending in Canada: Riskier but Manageable

Leveraged lending has grown over the past decade, as a benign credit environment has combined with low interest rates and investors’ search for yield. Although this lending has become more prevalent in Canada, the absolute level remains relatively small and is concentrated in a few sectors. In DBRS Morningstar’s opinion, leveraged loans do not pose a major risk for the Canadian financial system, but could exacerbate the impact of any downturn.