In its latest annual report released on Sunday, the Bank for International Settlements has warned of “worrying” early signs of unsustainable property price and credit growth. Reuters reports:
“Several early warning indicators signal that vulnerabilities have been building up in the financial systems of several countries,” the BIS said in its annual report.
While no early warning indicator is completely reliable, dismissing such readings as inappropriate would be too easy, it said.
In many emerging market economies and Switzerland the credit-to-GDP gap, measuring the current ratio against its long-term trend, is “well above the threshold that indicates trouble”, the Basel-based bank said.
The gap between real residential property prices and their long-term trend also suggests risks are accumulating in the housing sector, it said...
Rising rates would push the debt service ratios - the share of income used to service debt - of several countries into critical territory, the BIS said, adding that borrowers in China were currently seen as most vulnerable.
The full report can be found here.
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