Rapid growth of leveraged lending – typically loans to non-investment grade firms that are highly indebted or are owned by a private equity sponsor – meant the share of debt owed by companies with debt more than 4 times their regular cash flow had increased from less than a quarter to more than a third. These companies won’t have much cash and will find it harder to raise new debt finance. In effect, the economy entered this crisis with a weakness that may make it more prone to scarring. The UK is by no means an outlier in this regard. In the United States, growth of leveraged lending was almost twice of that in the UK in recent years. The Federal Reserve has noted how this weakness in corporate balance sheets is likely to amplify the adverse effects of the virus disruption.9  There will be lessons to learn. We had warned about this since 2017 and ensured banks doing the lending could withstand the losses. When this is over and we can step back, we – and other central banks – will need to return to the question of whether unconstrained growth of corporate leverage in the good times puts the wider economy at greater risk of harm in the bad and, if so, whether measures are called for to limit the growth of corporate leverage.
BIS central bankers’ speeches  As I mentioned before, in addition to improvements in the existing Libor interest rates, the FSB also proposes that alternative benchmark interest rates be developed. In Switzerland, alternative interest rates for very short-term Swiss franc transactions already exist. An example of these on the secured money market is SARON,2 which is the basis for the interest rate curve on the Swiss franc repo market. On the unsecured market we have the TOIS3 fixing, which is related to transactions in the area of call money and is used for interest rate derivatives. However, reforms were also necessary for the TOIS fixing. Consequently, new standards have been in place since 1 October. These are in line with international requirements and have resulted in a number of enhancements, including improvements to supervisory structures and codes of conduct. For these benchmark rates, too, the underlying transaction volume is currently very low. Foreign exchange benchmarks I will now turn my attention to benchmarks on the foreign exchange market. On the international financial markets, currencies are traded around the clock. There are no final rates for any given day. Given this situation, benchmarks on the foreign exchange market provide numerous investors, such as investment funds or asset managers, with a basis which they can use for uniform valuation of their portfolios. One of the best-known benchmarks is the WM/Reuters fix, which is set daily at 4.00 pm, London time; it is calculated as the median of actual foreign exchange transactions conducted within the period of one minute.