So, this is the biggest risk that is similar in nature to the toxic securitized-loans made in the housing industry in the US that caused the Great Recession.
... leveraged loans. These are giant loans that banks make to heavily indebted — in financial speak, highly leveraged — companies. Bankers often have little assurance that the loans can be repaid, which can make them particularly risky. Bankers earn large fees off these products, and many banking executives say their institutions are sheltered from losses because they sell the loans to other investors such as hedge funds, mutual funds and insurance companies. [Source]
Here's the deal. It's not good enough that these poorly underwritten loans are passed on to other entities.
If the banks are "too big to fail," if they won't be nationalized the next time they become insolvent (they were all insolvent before the Great Recession), then such loans should not be allowed.
If the bad banks will be allowed to fail and be placed into bankruptcy and nationalized as utilities so the People won't suffer the way they suffered due to the deregulation that led to the Great Recession, then these bad loans won't be so negatively impactful economy wide.
Those who invested in them will have to take the full hit with zero governmental bailouts. They have the poverty safety net to catch them just the way the little people have.
It will lead to a complete restructuring of the US economy, which should have happened right after the Great Recession.