Fed Says Vulnerabilities Tied to Financial Leverage ‘Notable’

The Federal Reserve flagged vulnerabilities tied to leverage in a semi-annual report on financial stability that said the banking system remained “sound and resilient.”

The report, which isn’t a forecast, said that hedge fund leverage had increased. It had grown across strategies and earlier this year reached the highest level since regulators began tracking it as they currently do more than a decade ago, the Fed said.

“While banks and broker-dealers have maintained solid capital positions, leverage for some other types of financial entities — such as hedge funds and life insurers —was elevated relative to historical standards,” the ...