Risky Loans Shunned by Banks Are Booming in Wall Street's Shadow

Regulators’ efforts to rein in Wall Street’s biggest banks are in danger of backfiring.

Guidelines aimed at strengthening lending standards are shifting the market for high-yield credit to less-supervised loan funds, raising alarm this week from the Financial Stability Oversight Council. Because the funds don’t have depositors, some of their money comes from Wall Street banks, leaving systemically important institutions exposed to risks regulators hoped to avoid.