Figure 8. Banks’ Declining Role in Credit Intermediation LEVERAGED LENDING AS “METERED” Collateralized Loan Obligations (CLOs), which today serve DISINTERMEDIATION as the ultimate home for about 70% of leveraged loans. The ability to distribute loans is key to their origination; CLO Leverage lending perhaps best clari昀椀es this asset-client issuance explains over 80% of the variation in leveraged loan distinction. Originally conceived to allow one bank to origination volumes over the past six years (Figure 9, page 9). o昀昀load credit risk onto others, syndicated lending became a mechanism for the banking sector as a whole to o昀昀load In other words, leveraged lending still represents credit risk onto nonbanks. In 2000, banks accounted for disintermediation – the term loans end up on nonbank about 20% of the primary purchases of leveraged term balance sheets – but it’s of a sort that allows banks to loans. By the onset of the pandemic, that 昀椀gure had garner underwriting fees, receipts from loan sales, and dropped to 3%.4 strengthen relationships with borrowers in ways that can lead to other value-added services, like interest rate and On average, the agent bank responsible for arranging foreign exchange hedging, 昀椀duciary and deposit services, committed credit for its client sells down its share of the term transaction fees, loan sales, and other sources of noninterest loan balance from 28% at the time of origination to just 1% income that waned markedly during the time of private three months later. Most of the loan ends up in the hands of credit’s ascendence (Figure 10, page 9). Figure 8. Source: Carlyle Analysis; Federal Reserve Board of Governors. There is no guarantee any trends will continue. 4. FDIC (2019). P. 35. 8