Wall Street banks tighten oversight after corporate frauds

A wave of alleged frauds among small and midsize corporate borrowers is shaking Wall Street, pushing banks and investors to toughen lending standards.

Lenders are now demanding longer financial histories and adding clauses for more frequent audits before granting loans.

The move follows bankruptcies at firms like First Brands and Tricolor Holdings, accused of double-pledging assets to different lenders.

In response, major banks, asset managers, and accounting firms have joined the Structured Finance Association’s new “Fraud Mitigation Task Force,” which will recommend safeguards by February.

The effort aims to protect investors and prevent systemic risks in asset-based lending, a fast-growing area where loans are backed by receivables.